26 

features  of  all  these  non-fraternal  organizations  (which  parade  the  fact 
that  their  members  have  no  lodge  meetings  to  attend)  that  the  manage- 
ment is  vested  in  a  Board  of  from  five  to  nine  Directors,  who  are  prac- 
tically irremovable.  Either  in  the  laws  framed  by  themselves,  or  in  the 
form  of  application,  or  in  the  certificate  of  membership,  there  is  inserted 
some  clause  which  will  give  them  practically,  though  not  nominally,  an 
unlimited  lease  of  arbitrary  power. 

THE   MUTUAL   OF   OAKLAND. 

In  the  certificate  of  membership  of  the  Mutual  Endowment  Association 
of  Oakland  occurs  the  following: 

A  majority  of  the  Board  of  Trustees  shall  have  power,  in  the  absence  of  the  member 
herein  named,  at  any  meeting  of  the  association,  and  in  the  absence  of  any  proxy  of  said 
member,  to  represent  and  deposit  the  vote  or  votes  to  which  said  member  shall  be  entitled. 

According  to  this,  at  the  annual  meeting  for  the  election  of  officers,  a 
majority  of  the  Directors  can  cast  the  vote  of  all  the  absent  members  who 
have  not  sent  in  proxies.  What  a  simple,  guileless  method  of  perpetuating 
their  own  term  of  office.  As  the  number  of  absentees  at  such  annual 
meetings  far  outnumber  those  present  and  voting,  the  officers  are  not  in 
much  danger  of  being  ousted.  The  Mutual  Endowment  Association  of 
Oakland,  although  more  than  five  years  in  existence,  has  never  published 
a  statement  of  the  receipts  and  disbursements  of  its  general  or  expense 
fund.  As  it  not  only  charges  high  rates  of  admission  fees,  but  also  expro- 
priates 10  per  cent  of  the  monthly  assessments  for  this  fund,  the  amount 
received  must  be  very  large.  In  most  or  nearly  all  of  the  endowment 
associations  the  monthly  assessments  are  placed,  without  any  deduction,  to 
the  credit  of  the  endowment  fund;  but  the  Mutual  is  not  satisfied  with  the 
usual  sources  of  income  for  expenses,  and  takes  10  per  cent  of  the  assess- 
ments. Have  not  the  members  a  right  to  know  what  becomes  of  their 
admission  fees  of  from  $10  to  $30;  of  their  dues  from  $3  to  $30  paid  every 
year;  and  of  one  tenth  of  their  monthly  assessments?  What  are  the  sal- 
aries paid  to  officers,  and  how  much  is  paid  for  other  expenses? 

The  financial  statement  of  the  Mutual  of  Oakland  for  the  half  year 
to  July  1,  1889,  is  similar  in  style  and  character  to  that  issued  by  an  insur- 
ance company,  and  does  not  give  such  full  details  of  receipts  and  disburse- 
ments as  would  be  expected  from  a  cooperative  undertaking.  As  in  the 
case  of  the  Pacific  of  San  Francisco,  it  may  be  intelligible  and  satisfactory 
to  the  half  dozen  gentlemen  constituting  the  directory,  but  certainly  not  to 
the  body  of  the  members.  For  the  said  half  year  $6,115,  out  of  a  total  of 
$39,000,  that  is,  about  16  per  cent,  is  transferred  to  the  reserve  fund,  which 
already  amounts  to  $50,000.  As  this  reserve  fund  expands  year  after  year 
it  will  represent  an  accumulation  taken  from  the  members  and  put  in  the 
hands  of  perpetual  Directors.  Experience  has  shown,  in  the  case  of  old 
line  insurance  companies,  that  this  leads  to  extravagance,  high  salaries, 
etc.,  and  often  to  investment  or  speculation  for  the  benefit  of  those  in  charge. 

From  a  company  or  corporation  point  of  view,  the  Mutual  of  Oakland  may 
be  a  worthy  institution  and  deserving  of  confidence.  What  I  object  to  is 
its  pretense  of  being  a  cooperative  or  mutual  association,  when  its  methods 
are  proprietary  and  similar  to  insurance  companies  that  comply  with  the 
laws  relating  to  insurance  and  are  under  the  supervision  of  the  Insurance 
Commissioner. 


27 

HOW   THE   ENDOWMENTS   FIGURE. 

Unsound  financial  schemes,  like  some  of  the  so  called  "national" 
building  and  loan  associations,  and  most  of  the  proprietary  endowment 
organizations,  have  the  happy  knack  of  so  involving  their  victims  in  an 
inextricable  maze  of  figures,  denoting  dollars  and  cents,  that  they  are 
unable  to  grasp  the  situation.  Like  the  uninitiated  struggling  with  the 
"fifteen"  puzzle,  they,  after  repeated  efforts  to  disentangle  the  problem, 
give  it  up  in  despair. 

The  Secretary  of  the  Pacific  Endowment  League,  instead  of  giving  a 
plain,  unvarnished  exhibit  of  the  financial  operations  and  conditions  of 
the  league  in  his  annual  report,  gives  one  of  those  interesting  puzzles, 
going  to  show  how  the  organization  can  fulfill  its  contract  with  the  holders 
of  coupons  for  the  next  two  years. 

There  is  not  in  said  report  a  word  or  a  figure  showing  what  has  been 
done  with  the  large  amount  of  money  contributed  by  the  members  for  the 
same  expense  fund. 

EXPENSE   FUND   OF   THE   PACIFIC. 

This  league  will  not  commence  the  levying  of  assessments  until  January 
1, 1890,  but  from  the  day  of  its  organization  it  has  collected  admission  fees 
and  quarterly  dues,  which  go  to  the  expense  account.  Let  us  see  how  much 
has  been  collected  under  these  two  items.  It  costs  members  $5  admission 
fee,  and  $1  50  per  quarter  for  dues.  Consequently  the  five  thousand  two 
hundred  and  eighty  members  must  have  paid  in  $26,400  admission  fees. 
As  each  one  must  pay  the  first  quarterly  dues  in  advance,  one  quarter's 
dues,  or  $7,920,  must  be  added  to  the  former  amount,  making  a  total  of 
$34,320. 

The  league  has  been  in  existence  one  and  one  half  years,  or  six  quarters, 
and  as  one  quarter  has  been  reckoned,  we  must  strike  an  average  as  to  the 
amount  paid  in  for  the  remaining  five.  Take  half  the  present  member- 
ship, or  two  thousand  six  hundred  and  forty,  paying  five  quarters,  at  $1  50, 
and  we  get  $19,800.  Adding  this  to  the  former  figures,  we  get  a  grand 
approximate  total  paid  into  the  expense  fund  of  the  league  of  $54,120. 
Where  is  the  published  statement,  which  should  be  in  the  hands  of  every 
member  of  the  league,  showing  what  has  been  done  with  every  dollar  of 
this  amount? 

All  the  genuine,  well-conducted  fraternal  insurance  associations  publish 
periodical  statements,  setting  forth  the  receipts  and  disbursements  in  every 
fund  down  to  the  last  cent.  All  moneys  are  paid  out  by  a  warrant  on  the 
Treasurer,  and  the  date,  number,  amount,  and  purpose  of  each  warrant  is 
clearly  set  forth. 

From  what  has  come  to  my  knowledge,  I  find  that  most  of  the  propri- 
etary endowment  institutions  keep  their  expense  account  under  lock  and 
key.  In  the  annual  report  of  the  Secretary  of  the  Pacific  League  is  the 
following: 

We,  the  undersigned  Finance  Committee,  have  made  a  careful  examination  of  the 
books  of  the  Secretary  and  Treasurer  for  the  fiscal  year  1888-89,  and  have  found  them 
correct  in  every  particular. 

J.  MARTINS,  Chairman. 

J.  H.  STRUCKMEYER. 

JAMES  MCALLISTER. 

Following  this  is  the  sworn  testimony  as  to  the  correctness  of  the  ac- 
counts by  an  expert  accountant.    This  is  all,  no  doubt,  very  satisfactory 


Ml 


|^?S*" 


■^^'^^l 


INVESTIGATION 


PLANS    AND    PRACTICES 


CO 


CHIEFLY   THOSE  KNOWN    AS 


ENDOWMENT  ASSOCIATIONS, 


STATE   BUREAU  OF   LABOR   STATISTICS. 


JOHN  J.  TOBIN,  Commissioner. 


TATE   OFFICE 


SACRAMENTO: 

:    J.    D.   YOUNG,    SUPT.    STATE    PRINTING.  © 

1889.  J 

; ■ fe^^^ 


INVESTIGATION 


INTO    THE 


"     PLANS   AND   PRACTICES 


CO-OPERATIVE  INSORANCE  ORGANIZATIONS 


CHIEFLY  THOSE  KNOWN  AS 


ENDOWMENT  ASSOCIATIONS, 


STATE   BUREAU  OP   LABOR    STATISTICS. 


JOHN  J.  TOBIN,  Commissioner. 


SACRAMENTO: 
STATE  OFFICE,  :   :  :   :   J.  D.  young,  supt.  state  printing. 

1889. 


S367515 


REPORT. 


In  the  course  of  an  investigation  by  this  bureau  into  the  extent  and 
character  of  provident  cooperation  in  this  State,  valuable  information  was 
obtained  relative  to  the  system  pursued  and  the  work  accomplished  in 
this  direction  by  trades  unions,  fraternal  societies,  and  cooperative  insur- 
ance associations. 

From  the  developments  which  arose  regarding  the  plans  and  practices 
of  the  cooperative  insurance  associations,  during  the  investigation,  I  have 
deemed  it  advisable  to  make  a  separate  report  of  them,  but  especially  of 
those  called  ''endowment"  associations. 

All  the  information  obtained  relating  to  the  provident  cooperative  fea- 
tures of  the  trades  unions  and  fraternal  societies  will  be  published  in  the 
next  biennial  report  of  the  bureau. 

COOPERATIVE    INSURANCE. 

Cooperative  insurance  in  its  various  forms — life,  accident,  endowment, 
etc. — has  come  into  existence  within  the  last  twenty-five  years.  Conse- 
quently it  is  yet  almost  too  young  to  be  judged  as  a  permanent  factor  in 
our  social  economy,  but  its  evolution  is  a  curious  and  interesting  study. 
It  was  begotten  on  the  ruin  and  havoc  wrought  by  the  innumerable  fail- 
ures of  life  insurance  companies.  We  are  living  in  a  progressive  age;  the 
"schoolmaster  is  abroad,"  and  his  lessons  are  bearing  fruit. 

When  people  saw  high  officials  of  insurance  companies  reveling  in  lux- 
ury and  massing  great  fortunes  from  the  money  which  they  had  contributed, 
they  asked  themselves  the  question,  "Why  should  we  not  insure  ourselves? 
If  the  officers  and  Directors  of  life  insurance  companies  are  able  to  hoard 
up  millions  of  a  reserve  fund  out  of  the  payments  of  the  insured,  why  should 
we  not  have  a  voice  in  deciding  what  disposition  should  be  made  of  such 
funds?  Through  cooperation  people  of  small  means  are  able  to  conduct  a 
business  enterprise  by  uniting  their  little  capital,  which  no  one  of  them 
could  possibly  do  alone,  therefore  let  us  cooperate." 

The  whole  scheme  of  cooperative  insurance  is  a  strike  against  the  sordid, 
selfish  aggrandizement  of  old  line  insurance  companies.  Wage  earners, 
men  and  women,  wanted  insurance  to  be  paid  in  frequent  small  pay- 
ments, but  the  agents  who  are  interested  in  large  premiums,  and  con- 
sequently large  commissions,  would  not  work  such  plans.  By  this  course 
they  killed  the  hen  that  laid  for  them  the  golden  egg,  because  the  people 
took  the  remedy  into  their  own  hands.  Since  the  advent  of  the  coopera- 
tive methods  but  few  life  insurance  companies,  on  the  old  lines,  have  been 
incorporated  where  the  former  are  in  operation. 

The  new  departure  is  most  plausible  in  theory  and  commends  itself  to 
all  who  carefully  study  its  features.  In  the  hands  of  capable  and  honor- 
able men  it  can  accomplish  a  world  of  good. 

The  plan  is  simply  for  a  number  of  people  to  combine  in  an  organiza- 
tion; to  charge  for  admission  and  annual  or  quarterly  or  monthly  fees  a 


sum  sufficient  for  reasonable  expenses;  and  to  assess  the  member  a  certain 
sum,  to  be  paid  at  certain  periods,  out  of  which  is  disbursed  the  amount 
of  insurance  to  the  member's  legatee  or  beneficiary. 

Such  a  plan  to  furnish  money  relief  to  an  humble  family  at  the  lowest 
cost,  and  at  time  of  great  need — either  in  old  age,  or  in  case  of  accident 
or  death — appeals  to  the  masses  as  most  deserving  of  support. 

At  first  this  plan  was  adopted  by  fraternal  societies  organized  for  other 
and  different  purposes,  who  put  it  in,  so  to  speak,  as  a  new  plank  in  their 
platform.  Those  interested  in  the  old  line  life  and  accident  insurance 
companies  tried,  by  every  means,  to  cry  down  this  new  departure  on  the 
part  of  the  fraternal  societies.  The  country  was  deluged  with  literature 
showing  the  impossibility  of  success.  Experts  were  employed  who  proved, 
beyond  the  possibility  of  contradiction,  the  utter  absurdity  of  the  frater- 
nals  being  able  to  fulfill  their  obligations.  "Figures  don't  lie,"  "You 
cannot  go  beyond  the  logic  of  cold  facts,"  they  continually  cried  out. 
Still,  in  spite  of  such  direful  prophecies  and  predictions,  in  the  face  of 
adverse  arithmetical  demonstrations,  against  all  powerful  monopoly  influ- 
ence, these  fraternal  societies  have  calmly  pursued  the  even  tenor  of  their 
way  and  faithfully  carried  out  their  pledges. 

It  may  now  be  said  that  they  have  passed  the  experimental  stage  and 
entered  upon  a  career  of  permanent  usefulness.  No  one  is  now  rash 
enough  to  dispute  that  the  fraternal  cooperative  insurance  societies  have 
furnished  an  immense  amount  of  relief  at  low  cost. 

METHODS   OF   OLD   LINE   INSURANCE. 

They  occupy  a  field  inaccessible  to  the  methods  of  the  old  life  compa- 
nies. They  have  forced  the  latter  to  a  considerable  reduction  of  rates, 
and  brought  them  to  a  realizing  sense  that  their  days  of  undivided  sway 
are  passed  forever.  The  enormous  amount  of  money  locked  up  in  the 
reserve  funds  of  the  old  line  insurance  companies,  mounting  up  to  the 
tens  and  hundreds  of  millions,  is  not  now  accumulating  at  such  an  alarm- 
ing ratio.  Take,  for  instance,  the  millions  hoarded  up  annually  and  placed 
in  reserve  funds  by  the  Mutual  Life  of  New  York,  the  Equitable  Life  As- 
surance, the  Connecticut  Mutual  Life,  and  the  New  York  life  insurance 
companies.  Where  do  they  come  from  ?  They  represent  an  amount  over 
and  above  the  necessary  expenditures  which  was  taken  directly  from .  the 
pockets  of  their  policy  holders  in  premiums.  That  it  is  proper  for  such 
companies  to  have  a  reserve  or  guarantee  fund  is  unquestionable,  even  if 
the  law  did  not  require  it,  but  to  go  on  forever  squeezing  their  shareholders 
in  order  to  pile  up  this  reserve  fund  mountain  high,  is  baneful  policy  and 
unjust  to  those  who  pay.  The  thousands  of  insured  who  have  raised  up 
these  immense  piles  from  a  cipher  foundation  have  practically  about  as 
much  present  and  prospective  interest  in  the  reserve  funds,  except  in  the 
way  of  guaranty,  as  the  slaves  under  King  Rameses  had  in  the  Egyptian 
pyramids  which  they  had  helped  to  build. 

The  Pennsylvania  insurance  reports  show  that  the  level  premium  insur- 
ance companies  collected  in  ten  years  $699,250,701.  They  paid  in  losses 
and  matured  endowments  during  the  same  period  $285,354,004.  Where 
did  the  difference  go,  amounting  to  the  enormous  total  of  $413,896,797? 

Twenty-nine  companies  in  the  State  of  New  York  received  in  premiums, 
in  1888,  over  $114,000,000,  of  which  only  $48,000,000  were  paid  for  death 
claims,  while  $29,000,000  were  paid  for  expenses.  For  every  dollar,  there- 
fore, paid  for  death  claims  more  than  sixty  cents  was  paid  for  expenses. 
The  balance,  $37,000,000,  were  added  to  the  assets  of  the  companies. 


Consequently  for  every  dollar  paid  for  death  losses  about  eighty  cents  was 
added  to  the  already  loaded  and  inflated  reserve  resources  of  these  gigantic 
corporations. 

No  wonder  that  insurance  magnates  have  been  able  to  live  in  a  style  of 
splendor  rivaling  that  of  a  Hindoo  Maharajah. 

The  Hne  at  which  the  bleeding  process  must  stop  has  been  discovered  by 
the  cooperative  insurance  associations.  On  the  other  hand,  so  many  bogus 
or  fraudulent  mutual  or  cooperative  insurance  companies  have  been  organ- 
ized, especially  in  San  Francisco,  that  a  provident  head  of  a  family  may 
prefer  to  be  bled  by  an  old  established  company  than  run  the  risk  of  losing 
all  in  a  mutual  concern  of  whose  character  and  ability  to  carry  out  its 
contract  he  has  some  misgivings.  After  the  old  fraternal  societies  (which 
merely  extended  their  lines  of  usefulness)  came  new  associations,  lodges, 
guilds,  etc.,  whose  chief  aim  and  object  was  professedly  the  insurance  or 
endowment  of  their  members,  such  as  the  Ancient  Order  of  United  Work- 
men, Knights  of  Honor,  etc.  Last,  there  followed  stock  or  proprietary 
associations  that  commenced  to  work  the  assessment  plan  of  life  and 
endowment  insurance  as  a  business  enterprise. 

THREE    CLASSES   OF    COOPERATIVE   INSURANCE. 

We  have  then  three  classes  of  assessment  insurance  organizations: 

1.  Fraternal,  with  insurance  superadded. 

2.  Assessment  insurance  guilds  or  lodges. 

3.  Assessment  insurance  associations. 

Of  the  three  classes  referred  to,  the  first,  or  strictly  fraternal  societies, 
such  as  the  Ancient  Order  of  United  Workmen,  Knights  of  Honor,  etc., 
are  looked  upon  as  little  republics,  making  their  own  rules  and  regulations 
by  common  consent,  and  therefore  requiring  no  legal  restraint  or  State 
supervision  to  protect  the  membership  from  imposition.  I  shall  not  refer 
to  them  further  in  this  report,  as  full  statistics  concerning  their  plans  and 
work  will  be  given  in  the  next  biennial  report  of  the  bureau.  It  will  be 
shown  therein  the  vast  amount  of  good  being  accomplished  by  such  socie- 
ties, especially  in  the  United  States  and  Great  Britian. 

Some  of  the  second  class  are  also  conducted  as  genuine  cooperative 
associations,  honestly  conducted,  all  the  members  pulling  together  in  the 
same  boat  and  sharing  the  same  fortunes — sink  or  swim.  Some  again 
are  sham  fraternal  guilds  under  the  control  and  guidance  of  needy  adven- 
turers, who  foist  themselves  into  official  position  and  manage  to  keep  them- 
selves there  so  long  as  the  society  lasts. 

With  regard  to  the  third  class,  they  embrace  three  forms  of  insurance 
organizations: 

1.  Insurance  payable  at  death. 

2.  Insurance  payable  on  account  of  sickness  or  accident. 

3.  Insurance  payable  during  life  at  certain  periods. 

In  this  report  I  propose  to  deal  only  incidentally  with  the  first  two 
classes.  As  a  general  rule  it  will  be  found  that,  although  ostensibly  coop- 
erative, they  are  in  reality  corporate  or  proprietary  in  their  management. 
In  the  form  of  application  for  membership  a  clause  is  generally  inserted 
by  which  the  applicant  gives  his  proxy  or  right  to  vote  to  the  Directors  of 
the  association  in  the  event  that  he  is  not  present  to  vote. 

In  the  case  of  one  of  these  associations  the  applicant  is  asked  to  give 
his  right  to  one  individual  Director  named.  As  all  the  members  are  sup- 
posed to  sign  this  form  of  application,  the  result  is  that  they  shift  the 
burden  from  themselves  and  place  the  management  in  the  hands  of  the 


Directors,  who  are  enabled  by  a  continuation  of  the  same  methods  of  get- 
ting proxies  to  perpetuate  their  term  of  office.  If  this  perpetuation  of 
power  should  fall  into  the  hands  of  good  men,  it  insures  the  stability  and 
success  of  the- enterprise;  otherwise,  the  usual  train  of  folly,  extravagance, 
and  disaster  follows. 

THE    HOME   BENEFIT   OF    SAN   FRANCISCO. 

The  Home  Benefit  Life  Association  of  San  Francisco  is  an  excellent  type 
of  the  mutual  or  assessment  plan  of  life  insurance.  It  was  established  in 
1880,  and  reorganized  in  1885,  and  from  small  beginnings  has  now  reached 
a  position  where  success  is  assured.  Its  growth  has  been  steady  and 
healthy.  The  number  of  members  is  two  thousand  five  hundred  and 
three;  and  the  total  income  from  assessments  last  year  amounted  to 
$135,335  85. 

One  third  of  the  sum  received  from  assessments  is  placed  in  the  reserve 
fund,  which  now  amounts  to  $31,000.  It  belongs  to  the  members,  and  is 
returned  to  them  at  certain  fixed  intervals.  Here  lies  one  of  the  chief 
points  of  difference  between  the  old  line  company  methods  and  the  new 
mutual  or  cooperative.  In  the  former  a  large  proportion  of  the  premiums 
paid  by  the  insured  went  to  swell  the  reserve  fund.  In  the  latter  reserve 
funds  are  not  allowed  to  reach  large  proportions,  but  are  regularly  dis- 
tributed among  all  the  members  entitled  to  a  share. 

The  plan  of  the  Home  Benefit  in  this  regard  is  to  place  all  the  members 
joining  in  any  one  year  in  the  same  series,  like  the  plan  of  building  and 
loan  associations.  One  third  of  the  assessments  paid  by  each  of  these 
members  is  placed  to  his  credit  in  the  reserve  fund  of  that  year  or  series. 
At  the  end  of  five  years  all  that  has  been  paid  into  the  reserve  fund  by 
each  of  the  members  of  that  series  is  paid  back  to  him,  with  accumula- 
tions from  interest  and  lapses.  He  can  get  this  amount  in  cash,  or  allow 
it  to  be  used  in  the  reduction  of  future  assessments. 

Consequently  the  reserve  fund  mainly  consists  of  the  one-third  assess- 
ments of  members  for  five  years.  Not  one  dollar  can  be  taken  from  this 
fund  for  expenses  or  other  purposes. 

The  only  condition  under  which  it  can  be  touched  is  for  temporary  ap- 
plication to  the  mortuary  or  death  benefit  fund,  if  a  death  rate  in  excess 
of  the  normal  should  occur;  and  this  is  a  wise  precaution,  for  a  cardinal 
principle  of  such  associations  should  be  the  prompt  payment  of  death 
losses.  The  amount  so  taken,  however,  must  be  returned  to  the  reserve 
fund  as  soon  as  collected.  This  periodical  division  of  the  reserve  fund, 
with  its  profits,  enables  the  persistent  member  to  apply  his  pro  rata  of  said 
fund  towards  reducing  his  insurance  as  he  grows  older.  The  fact  of  being 
entitled  to  such  a  distribution  or  dividend,  every  five  years,  is  in  itself  a 
strong  inducement  to  the  insured  to  continue  their  payments  and  not  for- 
feit what  they  had  already  paid  in. 

Another  excellent  feature  in  the  Home  Benefit  is  economy  of  manage- 
ment. The  expenses  of  management  in  this  association  for  the  past  year 
was  fourteen  per  cent  of  the  total  receipts. 

When  I  entered  upon  this  investigation  the  officers  of  the  association 
placed  every  facility  at  my  disposal  for  a  thorough  investigation  of  its 
affairs.  All  the  books  and  papers  of  the  office  were  opened  for  my  inspec- 
tion. I  was  thus  enabled  to  corroborate  the  correctness  of  the  returns  sent 
in  to  this  bureau  by  the  Secretary. 


ENDOWMENT    ASSOCIATIONS. 

Again,  in  the  third  class  are  included  the  so  called  mutual  endowment 
associations,  under  company  or  proprietary  management.  They  are,  as  a 
general  rule,  unsound  or  bubble  schemes.  After  a  careful  examination 
of  the  plans  of  the  endowments,  and  after  procuring  as  much  information 
as  possible  about  their  methods  of  doing  business,  I  determined  to  hold 
an  open  investigation,  in  order  to  make  as  public  as  possible  the  nefarious 
practices  of  some  of  these  associations.  The  testimony  taken  and  received, 
which  is  herewith  submitted,  is  very  instructive,  and  gives  practical  illus- 
trations of  the  ways  and  means  by  which  thousands  have  been  deluded 
and  robbed. 

California  has  become  a  hotbed  for  financial  schemers,  whose  business 
it  is  first  to  entrap  and  then  to  fleece  unwary  and  unsuspecting  dupes. 
Some  of  the  knowing,  but  over  confident,  ones  are  also  frequently  caught. 
A  great  many  of  these  schemes,  under  the  mask  or  cloak  of  being  mutual 
or  cooperative,  have  been  set  afloat  within  the  past  few  years,  and  the  cry 
is  "still  they  come." 

San  Francisco  has  the  misfortune  of  being  the  headquarters  or  base  of 
operations,  from  whence  the  agents  of  these  schemes  are  sent  all  over  the 
country  to  prey  upon  the  gullible.  As  a  natural  consequence,  San  Fran- 
cisco is  supposed  to  nourish  and  back  these  new-fangled  schemes,  which 
are  masquerading  under  the  popular  aegis  of  cooperation.  It  is  time  to 
be  up  and  doing,  that  the  fair  name  of  the  metropolis  of  the  State  may 
not  be  smirched  and  become  a  word  of  reproach  to  thousands  of  victims 
beyond  our  borders.  In  most  of  the  Eastern  States  laws  are  in  force  which 
shut  out  such  impostures.  There  is  an  imperative  necessity  for  similar 
protection  in  California,  as  will  be  shown  by  the  facts  set  forth  in  this 
report. 

About  thirty  thousand  members  are  enrolled  in  the  endowment  associa- 
tions of  California.  The  principal  associations  in  San  Francisco  and  Oak- 
land have  a  membership,  in  round  numbers,  as  follows: 

United  Endowment  Associates 5,500 

Legion  of  the  West. 2,500 

Hoyal  Argosy _ 2,000 

Pacific  Endowment 5,000 

Guaranty  Endowment - 2,000 

Eurel^a  Endowment 1,500 

Mutual  of  Oakland 1,000 

Equity  Benefit 500 

Total 20,000 

This  leaves  a  balance  of  ten  thousand  for  the  small  associations  in  San 
Francisco  and  other  cities  of  the  State.  There  are  about  fifteen  thousand 
members  in  addition  belonging  to  life,  sickness,  and  accident  insurance 
associations,  on  the  mutual  or  assessment  plan,  that  claim  to  be  exempt 
from  the  supervision  of  the  Insurance  Commissioner  and  not  to  come 
within  the  purview  of  our  insurance  laws. 

As  the  usual  admission  fee  is  $5,  the  thirty  thousand  members  of  the 
endowments  must  have  paid  about  $150,000  for  the  privilege  of  having 
their  names  placed  on  the  roll.  This  goes  to  the  general  or  expense  fund. 
There  is  a  quarterly  charge  besides  for  expenses  of  management,  which 
usually  amounts  to  $6  per  year  for  each  member,  making  a  total  of  $180,- 
000  per  annum. 

Taking  the  average  monthly  rate  of  assessment  for  the  endowment  or 
insurance  fund  at  $2  50,  or  $30  per  year,  nearly  $1,000,000  per  annum  would 


8 

be  drawn  from  the  members  for  that  fund  alone  if  they  were  all  levying^ 
such  assessments.  Fortunately  they  are  not.  Several  at  present  are  con- 
tent with  raking  in  the  coin  which  is  paid  for  admission  fees  and  quarterly 
dues,  and  is  sacred  to  the  uses  of  the  management. 

From  the  large  number  of  persons  interested  in  these  endowment  asso- 
ciations and  on  account  of  the  heavy  interests  involved,  the  necessity  and 
expediency  of  a  report  concerning  their  status  and  methods  can  at  once  be- 
seen,  especially  in  view  of  the  fact  that  they  are  not  required  by  law  to- 
publish  such  a  report  themselves  and  are  not  under  the  supervision  of  any 
State  authority.  Ostensibly  all  of  these  organizations  are  cooperative- 
insurance  associations,  formed  for  the  mutual  benefit  of  the  members  and 
not  for  profit. 

It  will  be  found  upon  reading  this  report  that  many  of  them  are  only 
sham  cooperatives,  and  "that  they  have  been  organized  for  the  profit  of  a 
few  inside  managers,  who  have  everything  to  gain  and  nothing  to  lose  by 
the  success  or  failure  of  the  enterprise.  Most  of  them  are  based  upon  glit- 
tering and  specious  plans,  alluring  to  the  unsophisticated,  who  are  drawn 
into  them  by  the  thousands.  To  such  an  extent  has  this  craze  gone  that 
now  no  miracle  of  converting  tens  into  thousands  is  too  astounding,  and 
no  scheme  of  acquiring  capital  in  two  or  three  years  by  means  of  small 
monthly  installments  is  too  extravagant  or  impracticable  in  the  eyes  of 
the  gullible  public.  All  that  the  plotters,  who  float  these  schemes,  have 
to  do  is  to  see  that  their  lines  are  well  baited  with  seductive  promises  and 
shoals  of  gudgeons  will  rise  to  the  surface  and  bite.  As  a  natural  conse- 
quence endowment  associations  of  this  class  are  as  thick  as  blackberries^ 
and  the  number  of  their  victims  is  legion. 

While  the  contracts  made  by  these  associations  are  in  form  and  sub- 
stance life  insurance  policies,  it  borders  on  the  ridiculous  to  designate  their 
methods  as  of  the  same  business  character  as  those  of  the  regular  life 
insurance  companies. 

The  articles  of  incorporation  in  themselves  are  without  objection,  as  they 
set  forth  the  cooperative  benevolent  objects  of  the  organization.  It  is  in 
the  execution  of  the  plan — the  carrying  out  of  these  benevolent  objects — 
that  the  organization  deserves  either  censure  or  condemnation.  In  the 
prospectus  and  other  publications  we  find  the  scheme  of  these  associations 
outlined.  The  endowment  associations  issue  a  certificate  of  membership^ 
which  is  an  agreement  to  pay  to  the  insured,  at  stated  intervals,  of  from 
one  to  ten  years,  a  certain  sum  specified.  The  extent  of  the  interval  gen- 
erally depends  upon  the  age  of  the  member  upon  entering — the  greater 
the  age  the  shorter  the  interval.  They  also,  in  most  instances,  issue  a 
beneficiary  certificate,  which  is  simply  a  contract  to  pay  to  the  heirs  of  the 
member  or  his  nominee  in  the  policy  a  stated  amount  at  death.  The  con- 
sideration for  both  agreements  is  assessments  to  be  levied  upon  the  mem- 
bers of  the  association.  The  amount  of  each  assessment  is  fixed  by 
classification,  or  regulated  according  to  the  age  of  the  insured  in  tables,  so- 
that  a  member  generally  knows  the  amount  of  his  assessment,  but  as  the 
levying  of  them  is  left  to  the  judgment  of  the  Directors  he  cannot  tell  the 
number  he  has  to  meet  during  the  year. 

NO  PROTECTION   UNDER   THE   LAW. 

Unfortunately,  in  California  there  is  no  government  protection  from 
barefaced  imposition  and  misrepresentation  on  the  part  of  wily,  designing 
schemers,  who  organize  these  fraudulent  endowment,  accident,  and  life 
insurance  associations  under  the  pretense  of  benevolent  or  fraternal  coop- 


eration.  The  State  Insurance  Commissioner  is  powerless  in  the  matter, 
because  Section  451  of  the  Civil  Code  of  California  takes  them  from  under 
his  supervision.     It  reads  as  follows: 

Sec.  451.  All  associations  or  secret  orders,  and  other  benevolent  or  fraternal  cooperative 
societies,  incorporated  or  organized  for  the  purpose  of  mutual  protection  and  the  relief  of 
its  members,  and  for  the  payment  of  stipulated  sums  of  money  to  its  members,  or  to  the 
families  of  deceased  members,  and  not  for  profit,  are  declared  not  to  be  insurance  compa- 
nies in  the  sense  and  meaning  of  the  insurance  laws  of  this  State,  and  are  exempt  from 
the  provisions  of  all  existing  laws  of  this  State. 

This  section  was  enacted  to  enable  mutual  or  cooperative  insurance 
organizations  to  do  business  in  California,  and  also  to  relieve  genuine 
fraternal  organizations,  such  as  those  referred  to  in  the  first  class,  from  any 
annoying  interference  from  non-members  with  their  secret  internal  affairs. 
The  old  line  insurance  companies  fought  the  b'ill  through  every  stage 
unsuccessfully.  The  object  of  the  law  was  good,  but  it  was  perverted  from 
its  original  purposes,  and  used  as  a  shield  or  barrier  to  protect  schemers  in 
their  nefarious  transactions  from  official  overhauling. 

In  their  literature  most  of  the  bubble  schemes  parade  the  fact  that  they 
have  been  incorporated  under  the  laws  of  the  State  of  California.  This  is 
done  for  the  purpose  of  creating  the  impression  that  they  are  subject  to 
State  inspection,  or  obliged  to  send  in  reports  at  stated  periods  to  some 
official,  or  that  the  State  holds  some  of  their  securities  for  the  protection 
of  members.  Some  of  them,  how^ever,  never  incorporated  at  all,  and,  so 
far  as  the  interests  of  the  membership  are  concerned,  it  is  a  matter  of  very 
little  consequence,  for  incorporation  does  not  protect. 

Section  382  of  the  Civil  Code  of  California  provides  that  the  Attorney- 
General  or  District  Attorney,  whenever,  and  as  often  as  required  by  the 
Governor,  must  examine  into  the  affairs  and  condition  of  any  corporation 
in  this  State. 

Outside  of  this  conditional  direction  there  is  no  provision  of  the  law 
making  it  obligatory  on  any  government  officer  to  examine  into  the  affairs 
and  condition  of  such  institutions.  Consequently,  the  citizens  of  Califor- 
nia can  be  duped  and  plucked  and  victimized  at  the  sweet  will  and  pleasure 
of  every  designing  knave  under  cloak  of  land,  building,  loan,  endowment, 
accident,  patent,  mining  stock,  and  other  schemes.  Exposures  in  the 
public  press  from  day  to  day  do  not  drive  these  rascals  from  the  ground. 
Suppressed  to-day,  they  bob  up  serenely  in  some  new  disguise  to-morrow. 

ENDOWMENT   TRANSFORMATIONS, 

Like  the  Grand  Llama  of  Thibet  they  never  actually  die.  They  are 
metamorphosed,  or  undergo  simply  a  transmigration  of  soul.  If  knocked 
on  the  head  as  a  "  Pacific  "  institution,  they  reappear  as  an  "  Occidental;'^ 
and  if  deprived  of  breath  as  an  "  Equity,"  they  come  "  in  questionable 
shape"  as  a  "Fidelity." 

For  instance,  when  the  Pacific  Coast  branch  of  the  "  Mutual  Self  En- 
dowment and  Benevolent  Association  of  America,"  with  headquarters  at 
Longview,  Texas,  departed  this  life,  its  soul  transmigrated  into  the  Pacific 
Mutual  Self  Endowment  Association.  Upon  the  decease  of  the  latter  it 
underwent  a  transfiguration  and  came  up  smiling  as  the  Occidental  Self 
Endowment  Association.  When  the  last  went  the  way  of  all  flesh,  the  faith- 
ful were  told  to  worship  at  the  shrine  of  the  Western  Mutual  Benefit  Asso- 
ciation. 

The  following  is  a  list  of  defunct  endowment  associations  that  first  drew 
the  breath  of  life — not  an  honest  breath — in  this  State  and  suddenly  gave 


10 

up  the  ghost,  leaving  countless  mourners  behind.  They  sprung  into  exist- 
ence full  of  the  seeds  of  death,  spluttered  like  a  midge  in  the  sunshine, 
and  then  vanished: 

DEAD   ENDOWMENTS. 

Mutual  Endowment  Association  of  Los  Angeles. 
National  Relief  Association  of  San  Francisco. 
Young  People's  Insurance  Society  of  San  Francisco. 
French  Mutual  Aid  Society  of  Sacramento. 
Occidental  Mutual  Endowment  Association  of  San  Francisco. 
Pacific  Mutual  Aid  Society  of  JjOS  Angeles. 
Union  Endowment  Association  of  San  Francisco. 
Southern  California  Mutual  Aid  Association. 
San  Francisco  Safety  Fund  Association. 
San  Francisco  Universal  Benevolent  Association. 
Pacific  Coast  Provident  Association  of  Sacramento. 

Pacific  Coast  Branch  of  the  Mutual  Self  Endowment  and  Benevolent  Association  of 
Texas. 
Pacific  Mutual  Endowment  Association  of  Oakland. 
People's  Life  and  Accident  Association  of  San  Francisco. 
California  Life  and  Endowment  Association  of  San  Francisco. 
Youths'  Mutual  Endowment  Association  of  San  Francisco. 
Minors'  Mutual  Endowment  Association  of  Livermore. 

Pacific  Coast  Mutual  Endowment  and  Protective  Association  of  Santa  Rosa. 
Order  of  Mutual  Companies. 
United  Friends  of  the  Pacific. 
United  Order  of  Honor. 

Farmers'  and  Mechanics'  Indemnity  Association  of  Fresno. 
Guardian  Mutual  Endowment  Association  of  San  Francisco. 
Phoenix  Fiduciary  Endowment  Association  of  San  Francisco. 
Tontine  Society  of  Oakland. 
California  Benevolent  Guild  of  San  Francisco. 
United  Endowment  League  of  San  Francisco. 
United  States  Mutual  Benefit  Association  of  San  Francisco. 

The  schemers  who  stood  by  the  cradle  of  these  death  inhaling  abortions 
were  not  to  be  seen  weeping  over  their  coffin  at  the  grave. 

Long  impunity  in  wickedness  begets  recklessness  and  disregard  of  public 
opinion.  Some  of  the  very  men  who  have  been  publicly  denounced  by 
name  in  the  press  and  from  the  platform  as  villains  of  the  deepest  dye  and 
deserving  of  public  execration,  are  still  to  be  found  prominent  in  associa- 
tions whose  objects  are  professedly  those  of  fraternity  and  benevolence. 
Their  finger  marks  can  be  found  in  the  plans  of  several  endowment  asso- 
ciations now  in  full  blast,  and  nothing  but  the  strong  arm  of  the  law  can 
save  the  public  from  their  machinations. 

HOW   PEOPLE   ARE   FLEECED. 

As  an  illustration  of  the  bold  and  unscrupulous  manner  in  which  citizens 
are  fleeced,  the  following  article  from  the  San  Francisco  "  Chronicle," 
which  has  unceasingly  exposed  these  impostures,  is  deserving  attention: 

TO   BE  WOUND  UP.— INVESTIGATING  THE  UNION   ENDOWMENT. — TWO  THOMPSONS'  TRICKS. — BOTH 
TO   BE  PROSECUTED. — MEETING  OF  SHORN  "POLICY   HOLDERS. 

The  last  of  a  series  of  meetings  of  the  policy  holders  of  the  defunct  Union  Endowment 
and  Mutual  Benevolent  Association  of  America  was  held  in  Odd  Fellows'  Hall  yesterday 
afternoon.    Dr.  Newell  called  the  meeting  to  order  and  mentioned  its  objects. 

Mrs.  L,  C.  Stratton,  on  behalf  of  the  Investigation  Committee,  stated  that  an  expert 
had  been  employed  to  go  through  the  books,  and  that  his  report  was  ready. 

J.  D.  Ford,  the  expert  referred  to,  was  tlien  called  upon  to  make  public  the  results  of 
his  examination.  The  bank  accounts,  as  shown  by  the  ledger,  the  cash  book,  as  shown  by 
the  vouchers,  and  the  assessment  and  due  books  lie  pronounced  correct  as  far  as  they  ^o. 
The  private  accounts  of  the  Directors  show  that  James  Alexander  paid  into  the  associa- 
tion $208,  and  drew  out  $272,  while  the  books  still  show  a  credit  balance  of  $176;  O.  C. 
Wheeler  paid  in  $108,  drew  out  $i38 ;  B.  and  Charles  C.  McDougall  paid  in  $237,  and  drew  out 
$337;  Smith  B.  Thompson  only  paid  in  $346  and  drew  out  $2,451,  while  his  credit  balance 
amounts  to  $424;  his  two  sons,  William  H.  and  F.  R.  Thompson,  paid  in  together  the 


11 

munificent  sum  of  $108.  and  drew  out  $3,330;  so  that  the  three  Thompsons  paid  in  $454 
and  received  in  return  $5,781,  or  nearly  $13  for  $1.  Continuing,  the  expert  showed  that  in 
addition  to  the  sahiries  of  the  Thompsons,  amounting  to  $125  each,  they  received  $10  for 
every  meeting  of  the  Directors,  although  such  meetings  were  held  in  the  offices  at  the 
Odd"Fellows'  building. 

The  vouchers  for  the  furnishing  of  the  offices  cannot  be  found,  and  those  who  supplied 
the  carpets,  etc.,  state  that  they  cannot  find  the  account.  The  bonds  of  S.  B.  Thompson 
and  of  his  son  are  not  to  be  found.  An  item  in  the  books  charges  $25  30  for  the  incorpo- 
ration certificate  of  the  State,  whereas  the  actual  cost  was  $15  80.  The  association  is  also 
charged  $34  for  books  and  blanks  made  out  in  the  name  of  the  Grand  Union  Mutual  Life, 
Health,  and  Accident  Association  of  the  United  States,  with  headcjuarters  at  Danville, 
Pennsylvania,  though  no  reason  is  assigned  for  the  charge.  Only  fifty  of  the  blanks  are 
to  be  found,  and  they  bear  the  name  of  Smith  B.  Thompson  as  agent  of  the  long  named 
association. 

The  most  weighty  discoveries  made,  and  those  which  created  quite  a  sensation,  were 
that  the  first  ten  pages  of  the  assessment  ledger  and  the  first  six  pages  of  the  dues  register 
have  been  cut  out.  A  note  appears  on  the  pages  of  the  first  book  stating  that  the  missing 
leaves  were  obliterated  b}'^  the  spilling  of  the  ink  and  are  to  be  found  in  the  safe.  Only 
one  leaf  was  found,  and  it  has  the  appearance  of  having  had  the  ink  rubbed  into  it. 
Five  death  claims  were  paid  by  the  association  according  to  the  books,  and  the  benefi- 
ciaries in  three  out  of  the  five  cases  were  the  Thompson  family.  Smith  B.  Thompson's 
claim  of  $527  was  paid  in  full,  but  the  duplicate  certificate  has  not  been  found,  and  the 
original  policies  of  Sarah  M.  Case's  claim,  from  Camden,  New  Jersey,  are  also  missing. 
Egbert  Thompson  died  in  May,  1887,  and  Welcome  A.  Thompson  in  August,  being,  as  one 
member  put  it,  the  "  wrong  Thompson  to  die."  The  balance  on  hand,  as  shown  by  W.  H. 
Thompson's  account,  was  $80  short  of  the  amount  entered  on  his  balance  sheet,  amount- 
ing to  $477. 

TRICKS   OF   THE   TRADE. 

Another  remarkable  example  of  the  methods  employed  by  the  schemers 
who  set  afloat  these  fraudulent  endowment  schemes  is  given  in  the  follow- 
ing article  taken  from  the  same  journal.  It  will  be  seen  from  this,  as  well 
as  from  the  last  article,  that  these  schemers  stop  at  no  villainy  to  screen 
themselves  from  exposure  and  consequent  punishment.  Books  and  papers 
are  mutilated  or  destroyed;  receipts  and  vouchers  are  torn  up;  the  absent 
and  the  dead  are  personated;  widows,  orphans,  invalids,  and  aged  persons 
are  victimized  and  robbed: 

THE   OCCIDENTAL  OFFICERS  TO    EXPLAIN.— NUMEROUS    FRAUDS   CHARGED.— HALF   A   MILLION^TO 
BE  ACCOUNTED  FOR. — A  NEW  SCHEME   FLOATED. 

At  last  an  attempt  is  to  be  made  to  check  the  unscrupulous  methods  of  that  class  of 
endowment  associations  which  has  been  repeatedly  held  up  to  public  view  in  the  columns 
of  the  "  Chronicle."  A  suit  was  filed  in  Department  5  of  the  Superior  Court  yesterday 
by  Carl  Spelling,  a  Santa  Rosa  attorney,  for  his  client,  Adele  Pieper,  against  the  Occidental 
Endowment  Association,  as  represented  by  W.  E.  Taylor,  the  City  Coroner,  Harr  Wagner, 
J.  L.  Liddle,  the  President,  George  C.  Jones,  the  Secretary,  J.  B.  Church,  J.  D.  Gray,  A.  W. 
Kelsey,  C.  S.  Richman,  and  several  others.  The  plaintiff  asks  for  an  accounting,  and 
has  filed  a  complaint  which  covers  twenty-two  pages  of  legal  cap  in  typewriting.  Her 
name  appears  in  the  case  at  the  instance  of  a  number  of  the  members,'all  of  whom  are 
anxious  to  have  the  business  of  the  association  investigated,  and  to  have  the  officers  pun- 
ished if  found  guilty  of  the  crimes  sworn  to  in  the  complaint. 

The  opening  pages  of  the  voluminous  document  trace  the  connection  between  the  asso- 
ciation sued  and  its  predecessor,  the  bankrupt  and  defunct  Pacific  Coast  branch  of  the 
Mutual  Self-Endowment  and  Benevolent  Association  of  America,  the  headquarters  of 
which  were  in  Longview,  Texas.  The  connection  with  and  identity  of  the  officers  of  both 
the  dead  and  the  now  insolvent  society  are  pointed  out  with  much  minuteness,  and  the 
facts  pertaining  to  the  assumption  by  the  Occidental  of  the  Mutual's  liabilities  are  his- 
torically presented,  with  a  complete  reprint  of  the  constitution,  by-laws,  and  contracts  of 
the  two  associations. 

Miss  Pieper  goes  on  to  state  that  on  January  3, 1884,  she  became  a  member  of  the 
**  Texas  swindle,"  as  it  has  been  called,  and  agreed  to  abide  by  its  laws,  paying  the  neces- 
sary fees  and  assessments  for  a  $5,000  policy.  In  August,  1887,  the  Mutual  ceased  to  do 
business.  The  lady  changed  over  to  the  Occidental,  according  to  the  terms  of  the  latter's 
offer,  and  continued  her  payments  until  January  3,  1889.  At  that  date  her  first  coupon 
of  $1,000  became  due  and  was  not  paid.  All  she  has  received  has  been  $100  advanced  to 
her  at  the  rate  of  eight  per  cent  per  annum  in  January,  1885. 

From  this  point  the  plaintiff  makes  the  most  damning  allegations  against  the  defend- 
ants. She  charges  that,  with  the  other  members,  she  has  paid  into  the  association  sued 
$500,000,  out  of  which  the  defendants  have  conspired  together  to  defraud  the  members 
and  creditors  of  the  society.    Eight  separate  counts  are  cited  in  support  of  the  assertions. 


12 

These  may  be  briefly  summed  up  and  are  as  follows:  False  and  fraudulent  entries  have 
been  made  in  the  books ;  fraudulent  reports  have  been  made  to  the  members  regarding  the 
receipts  and  disbursements  of  the  moneys  and  the  business  affairs  of  the  society.  An 
inspection  of  the  books  has,  it  is  said,  been  refused  the  members,  and  all  knowledge  of 
the  true  financial  condition  of  the  corporation  has  been  suppressed.  The  defendants 
named  are  accused  of  having  appropriated  $100,000  of  the  funds  of  the  corporation,  and 
of  having,  through  agents  and  personally,  sometimes  in  the  names  of  their  agents  and 
sometimes  in  their  own  names,  bought  up  apparently  past  due  coupons  and  paid  them  to 
themselves  in  full,  in  so  doing  making  away  with  about  $100,000  more.  In  the  same  way 
they  are  accused  of  having  bought  fictitious  assignments  of  claims  and  of  paying  to  them- 
selves the  claims  in  full,  amounting  in  the  aggregate  to  the  sum  of  $100,000.  The  last 
count  states  that  by  other  fraudulent  means  the  officers  paid  to  themselves  on  purchased 
certificates  the  sum  of  $200,000,  and  the  names  of  alleged  holders  of  eighteen  certificates 
of  $1,000  each,  all  paid  in  full,  are  cited  in  proof  of  the  assertion. 

The  most  interesting  part  of  the  document  is  comprised  in  the  closing  seven  pages.  It 
will  be  remembered  that  J.  J.  Vasconcellos  sued  the  association  last  month  for  $1,757,  and 
that  the  suit  went  by  default,  the  Sheriff  attaching  the  office  furniture,  books,  etc.  This 
suit,  the  plaintiff  alleges,  was  purposely  allowed  to  go  unanswered  in  order  that  the 
defendants  might  bid  in  the  books  at  public  auction,  and  then  destroy  the  evidence  of 
their  transactions. 

The  sale  was  advertised  to  take  place  yesterday  morning  at  eleven  o'clock,  but  the 
plaintiff's  petition  for  an  injunction  of  the  Court  restraining  the  Sheriff  was  served  a  few 
minutes  before  the  sale  was  to  have  commenced,  to  the  great  consternation  of  the  asso- 
ciation's officers,  who  were  present  in  numbers.  Mr.  Laumeister  was  ordered  to  deliver 
the  books  up  only  on  the  order  of  the  Court. 

The  complaint  closes  by  asking  the  Court  to  investigate  the  business  of  the  corporation 
as  conducted  by  its  officers;  that  she  be  awarded  $887,  the  balance  due  her,  and  that  a 
receiver  be  appointed.  Fox,  Kellogg  &  King  of  this  city  are  of  counsel  to  Carl  Spelling, 
Miss  Pieper's  attorney. 

The  effrontery  of  the  officials  of  the  concern  is  illustrated  by  the  fact  that  T.  J.  Brooke, 
J,  L.  Riddle,  and  George  C.  Jones  have  issued  circulars  urging  the  members  of  the  Occi- 
dental Endowment  Association,  which  they  admit  has  expired,  to  join  a  new  concern, 
called  the  Western  Benefit  Union.  The  offices  of  this  association  are  at  room  10,  Flood 
building,  and  C.  E.  Lesher  and  F.  T.  Morelle,  late  members  of  the  Occidental,  are  sponsors 
for  the  fledgling.  All  who  join  are  led  to  believe  that  they  will. get  what  the  sued  society 
owes  them,  although  in  another  paragraph  the  liabilities  of  the  latter  are  repudiated 
entirely.  Both  Lesher  and  Morelle  were  employed  to  buy  in  lapsed  policies,  and  draw 
the  amounts  of  matured  coupons,  for  which  the  managers  of  the  Occidental  gave  them- 
selves credit,  leaving  a  wide  margin  of  profit. 

WHO   THE   VICTIMS   ARE. 

Their  victims  can  be  found  in  almost  every  town  in  the  State,  for  the 
agents  of  these  vile  schemes  9,re  ubiquitous  and  irrepressible.  They  spare 
neither  age  nor  sex.  The  more  innocent  the  victim,  the  more  easy  to  be 
at  first  allured  and  then  betrayed.  An  evidence  of  this  can  be  found  in 
the  following  dispatch  to  the  "  San  Francisco  Chronicle  "  from  Santa  Rosa: 

THE  ENDOWMENT  SWINDLE. — WIDOWS  AND  NEEDY  PEOPLE  UNSCRUPULOUSLY  FLEECED. 

Santa  Rosa,  April  22. — Widows  and  credulous  persons  seem  to  have  been  the  principal 
objects  of  attack  of  the  Occidental  Self-Endowment  Association.  Widows  were  especially 
solicited  to  become  members:  To  this  end  a  woman  was  engaged  in  the  business  of  solic- 
iting lady  members,  and  success  crowned  her  efforts.  One  widow  yesterday  said  to  a 
"Chronicle"  reporter :  "  I  joined  the  association  after  being  solicited  to  do  so,  and  was 
assured  that  it  was  on  a  substantial  basis.  It  was  explained  to  me  as  a  loan  society.  I 
drew  my  first  loan,  which  was  $100,  without  any  trouble.  When  the  next  payment  was 
due  I  was  put  oft.  I  insisted  on  having  my  money,  when  I  was  informed,  to  my  surprise, 
that  the  organization  was  not  a  loan  society  and  was  never  intended  to  be.  Of  course  I 
could  do  nothing.  I  had  already  paid  quite  a  sum  of  money  and  could  not  afford  to  let 
my  policy  lapse  if  there  was  a  chance  to  get  back  the  money  I  had  paid  in.  In  a  few 
weeks  more  I  received  notice  that  the  assessments  had  been  doubled. 

"  I  sought  advice  from  the  Directors,  who  are  Santa  Rosa  business  men.  Two  informed 
me  that  they  did  not  know  anything  about  the  concern,  one  ending  his  remarks  with  the 
words :  '  When  my  assessments  are  due,  I  pay  them.'  The  other  said  those  organizing 
the  company  came  to  him  and  asked  permission  to  use  his  name.  Continuing  he  said  : 
*  I  found  out  that  I  could  not  become  liable  for  anything,  and  told  them  to  go  ahead.  I 
don't  know  much  about  the  affairs  of  the  association.' 

"  During  the  winter  months,"  continued  the  lady,  "  I  used  to  sew  while  in  bed  till  late 
into  the  nights,  that  I  might  economize  in  my  wood  bill,  so  the  assessments  might  be 
met.    My  coupon  is  due  in  July,  and  the  company  has  failed.    I  have  paid  in  about  $350." 


13 

A  janitress.of  the  public  schools  has  paid  a  good  many  dollars  from  her  small  and  much 
needed  salary  into  the  coffers  of  the  association. 

Another  widow,  who  has  a  mortgage  on  her  place,  has  been  anxiously  awaiting  the 
maturity  of  her  coupon  that  she  might  pay  off  part  of  her  incumbrance. 

CHARGES   AGAINST   THE    ENDOWMENTS. 

As  the  purposes  and  practices  of  these  non-fraternal  cooperative  insur- 
ance organizations  are  strikingly  similar,  a  diagnosis  of  a  few  will  suffice 
for  all.  In  what  I  have  to  say  I  expressly  and  emphatically  disclaim  mak- 
ing reflections  upon  the  character  or  motives  of  individuals.  Neither  do 
I  charge  that  they  are  dishonestly  conducted,  for  I  know  comparatively 
little  of  what  is  done  with  the  fees  and  dues  that  go  into  the  expense  and 
other  funds.  What  I  have  to  do  with  is  the  plan  of  the  organization,  and 
the  way  that  plan  is  carried  out.  In  other  words,  I  have  to  do  with  the 
ship  and  its  course,  and  not  with  the  crew  and  cargo. 

I  do  charge,  however,  that  they  afford  wide  scope  for  iniquitous  practices, 
and  the  fact  that  rascals  have  availed  themselves  of  the  opportunity  is 
evidenced  by  the  large  number  of  disastrous  failures  reported  in  the  press, 
with  all  their  rank-smelling  disclosures.  I  also  charge  that,  with  very  rare 
exceptions,  they  are  mere  money-making  concerns,  sailing  under  the  false 
color  of  a  benevolent  or  fraternal  cooperative  society;  that  their  tendency 
is  to  enrich  the  few  inside  managers  at  the  expense  of  the  membership; 
that  the  methods  of  nearly  all  are  unsound,  and  their  promises  delusive, 
and  collapse  will  be  the  inevitable  result. 

These  proprietary  institutions,  if  attacked,  try  to  shield  themselves 
under  the  armor  of  genuine  cooperative  organizations  which  have  estab- 
lished a  good  reputation  and  become  deservedly  popular.  "  Our  plans," 
they  will  argue, "  are  similar,  and  why  not  work  as  well  ?"  "  They  promised 
more  than  we  have  promised,  and  have  experienced  no  difficulty  in  per- 
forming as  they  promised,  and  were  never  in  so  flourishing  a  condition  as 
to-day,"  said  the  President  of  one  of  them  in  an  open  letter  addressed  to 
the  Labor  Commissioner. 

CONTRAST   BETWEEN   THE   FRATERNAL   AND   PROPRIETARY. 

There  is  a  vast  difference  between  a  truly  fraternal  organization  and 
one  under  the  management  of  a  few  individuals,  who  are  in  it  for  selfish 
purposes.  Although  the  latter  deny  that  these  institutions  are  organized 
for  profit,  no  sensible  person  will  believe  that  the  officers  are  merely 
working  for  glory.  The  members  in  the  fraternal  associations  are  like 
men  in  a  boat  pulling  together,  who,  in  case  of  danger,  will  cast  over- 
board all  dead  weight  and  incumbrances,  who  will  work  with  a  will  as 
one  man,  and,  in  the  hour  of  want  and  extremity,  will  divide  their  scant 
stock  of  provisions  share  and  share  alike.  The  members  in  the  propri- 
etary associations  are  like  guests  in  a  large  hotel,  who,  in  case  of  fire  or 
danger,  try  to  escape  with  what  little  they  can  lay  their  hands  on,  and  rush 
out  regardless  of  what  happens  to  others.  Some  of  them,  judging  from 
testimony  given,  are  not  over  particular  as  to  whether  it  is  their  own  or 
their  neighbors'  property  they  carry  off"  in  the  general  scramble.  "  Every 
man  for  himself,  and  the  devil  take  the  hindmost,"  is  the  motto  of  these 
pseudo  cooperatives. 

When  the  drain  upon  their  resources  grows  deeper  and  deeper,  as 
maturing  coupons  increase,  the  fraternals,  having  a  practical  knowledge 
of  the  situation,  vote  for  the  continually  increasing  assessments  because  of 
the  necessity,  and  because  they  know  that  all  the  members  of  the  lodge 


14 

have  to  do  the  same.  But  when  a  member  in  one  of  these  proprietary 
endowments  receives  additional  notices  of  assessments,  and  finds  himself 
in  the  dark  as  to  the  reasons  therefor,  he  soon  throws  up  his  membership 
in  disgust. 

PROPRIETARY   ENDOWMENT   PRACTICES. 

From  the  evidence  given  before  me  by  J.  J.  Vasconcellos,  of  San  Fran- 
cisco, it  appears  that  one  of  the  nefarious  practices  of  the  Directors  of  these 
proprietary  endowment  institutions  is  to  go  around  among  members  hold- 
ing policies  nearly  matured  (but  which  had  been  forfeited  by  lapsing  in  the 
payment  of  assessments)  and  buying  them  up  for  a  mere  pittance.  These 
policies  had  never  been  canceled  on  the  books  of  the  association,  and  even 
if  they  had  they  would  be  returned  and  the  amount  of  the  matured  cou- 
pon cashed  by  the  officer  of  the  association  who  had  bought  up  the  certifi- 
cate. Another  nefarious  practice,  as  shown  up  in  evidence  in  Court  in  San 
Francisco,  is  for  an  inside  organizer  of  one  of  these  associations  to  procure 
an  aged  dummy  member  as  representative,  whose  dues,  etc.,  would  be 
attended  to  by  said  "  insider,"  in  order  that  he  may  have  the  first  coupon 
mature  sooner  than  if  it  was  in  his  own  name.  Several  reliable  persons 
have  informed  me  that  the  practice  of  holding  powers  of  attorney  on  behalf 
of  dummy  members  is  quite  common.  By  this  means  it  would  be  impos- 
sible to  detect  by  an  examination  of  the  roll  of  membership  who  were 
really  the  persons  who  would  be  entitled  to  draw  cash  for  the  first  coupons 
maturing.  John  Doe  on  the  roll  would  be  the  dummy  representative  of  a 
Pecksniffian  Director  who,  for  obvious  reasons,  wished  to  conceal  his  iden- 
tity. On  the  other  hand,  some  of  the  proprietary  endowment  associations 
are  in  the  hands  of  men  of  respectable  social  and  business  relations  who, 
even  if  they  are  in  error  as  to  the  inevitable  outcome  of  the  enterprise,  will 
not  steal  the  funds  nor  countenance  jobbery.  Take,  for  example,  the  Mutual 
Endowment  of  Oakland,  the  officers  of  which  are  citizens  of  well  known 
probity.  Where,  however,  as  among  these  associations,  there  is  so  much 
chaff" — so  much  that  is  corrupt  or  open  to  suspicion — it  is  difficult  to  sift 
out  the  wheat.  The  managers  of  these  companies,  in  their  leaflets,  make 
the  point  that  the  members  are  not  required  to  attend  lodge  meetings,  which 
means  that  the  inconvenience  and  trouble  of  attending  to  the  affairs  of  the 
association,  weekly  or  monthly,  are  removed  from  the  shoulders  of  the 
members  and  placed  upon  those  of  the  half  dozen  or  so  individuals  who 
constitute  the  Board  of  Directors.  To  call  such  endowment  companies 
cooperative  is  a  misnomer  and  a  distortion  of  the  term. 

The  gentlemen  who  beget  the  schemes  not  only  elect  themselves  officers 
and  Directors,  but  take  the  necessary  steps  that  they  shall  be  succeeded 
only  by  themselves.  This  is  done  by  means  of  proxy  votes.  Only  the 
managers  are  acquainted  with  the  names  and  addresses  of  all  the  mem- 
bers. What  so  easy,  then,  when  the  day  of  annual  election  approaches, 
than  for  these  officials  to  hold  the  necessary  number  of  votes  to  reelect 
themselves?  Do  we  not  see  the  same  thing  done  every  day  by  Directors  in 
mining  stock  companies?  Again,  members  scattered  all  over  the  State 
can  take  little  or  no  active  part  in  the  affairs  of  such  an  institution.  At 
the  annual  meeting  members  living  at  a  distance,  say  from  Shasta  or  San 
Bernardino,  cannot  attend  without  considerable  loss  of  time  and  expense. 
The  offices  where  such  meetings  are  supposed  to  be  held  could  accommo- 
date only  a  very  small  fraction  of  the  membership.  The  association  will 
not  defray  their  expenses  or  allow  them  a  per  diem. 


15 

THE   LODGE    SYSTEM. 

Under  the  lodge  system  all  this  is  done.  The  expenses  and  per  diem 
of  representatives  of  lodges  from  remote  districts  are  paid  by  the  associa- 
tion. A  large  and  representative  body  of  members  come  together  to  delib- 
erate and  transact  business  of  common  benefit  to  all.  Such  organizations 
deserve  to  be  called  cooperative.  That  there  are  no  lodge  meetings  to 
attend,  therefore,  instead  of  being  an  inducement,  should  be  a  hindrance 
to  a  person  becoming  a  member.  Lodge  meetings  mean  that  the  members 
have  the  management  of  affairs  in  their  own  hands.  No  lodge  meetings 
mean  that  four  or  five  members  or  individuals  manage  affairs  to  suit  them- 
selves. These  so  called  associations  are,  then,  practically  private  com- 
panies or  corporations,  without  the  corresponding  risk  of  capital  usual  on 
the  part  of  the  Directors.     The  way  the  thing  is  done  is  about  as  follows: 

HOW   ENDOWMENT   ASSOCIATIONS   ARE   ORGANIZED. 

Four  or  five  persons,  with  an  eye  to  the  main  chance,  get  together  in 
some  back  room  and  concoct  an  endowment  insurance  scheme,  with  some 
high  sounding  title  like  the  "  Fidelity  Mutual  Guarantee  Self-Endowment 
Association  of  America."  They  draw  up  a  set  of  by-laws,  elect  themselves 
officers  and  Directors;  send  the  necessary  papers  and  fees  to  the  County 
Clerk  and  Secretary  of  State  for  incorporation,  and  they  are  ready  to  do 
business  under  the  great  seal  of  the  State. 

The  only  additional  expenses  required  are  the  payment  of  office  rent,  a 
little  in  advance,  and  either  the  purchase  or  hire  of  a  desk,  chairs,  etc. 
Some  printing,  showing  forth  the  stupendous  merits  of  the  scheme,  has  to 
be  done,  which  can  be  paid  for  as  soon  as  the  fees  commence  to  flow  in. 

The  schemers  and  plotters  are  now  ready  for  business.  Agents  are 
employed  to  work  upon  the  gullible,  and  rake  in  the  coin  for  admission 
fees  and  quarterly  dues. 

WOMEN   CANVASSERS. 

Women  are  found  to  be  excellent  canvassers  for  endowment  schemes, 
and,  in  consequence,  are  very  generally  employed  to  bring  in  others  of  the 
sex.  Women  are  less  disposed  than  men  to  study  out  the  problem  as  to 
how  one  dollar  can  multiply  itself  into  five  in  the  course  of  three  or  four 
years.  Eve  did  not  enter  into  a  mathematical  or  theological  discussion 
with  the  Devil  in  the  Garden  of  Eden.  As  many  of  them  say,  "  They 
have  no  head  for  figures."  It  is  enough  for  some  of  them  to  learn  that 
"  Mrs.  or  Miss  so  and  so  got  $500  the  other  day  when  her  coupon  became 
due,  and  she  had  paid  in  less  than  $100."  The  deduction  naturally  follows 
that  they  also  will  receive  the  value  of  their  coupons  when  due.  They  do  not 
reflect  that,  like  in  lottery  schemes,  for  the  one  prize  there  are  a  thousand 
blanks,  and  for  the  one  woman  who  got  her  coupon  cashed  there  are  a 
thousand  who  found  the  concern  bankrupt  when  their  coupons  fell  due. 
One  of  the  canvassers  in  petticoats  succeeded  not  long  ago  in  inveigling 
about  a  dozen  poor  factory  girls  into  joining  one  of  the  rankest  endowment 
associations  in  San  Francisco.  These  canvassers  receive  from  $1  to  $3  of 
the  initiation  fee  of  each  member  they  bring  in,  and  when  they  are  in  the 
country  they  receive  more  for  traveling  expenses. 

PLANS   OF   THE   ENDOWMENTS. 

The  plans  or  objects  of  these  institutions,  although  having  a  verisimili- 
tude, are  as  dissimilar  in  detail  as  the  patches  of  a  "crazy"  quilt.     Each 


16 

one  starts  out  with  "new  features,"  immeasurably  superior  to  all  the  other 
schemes  in  operation.  The  difference  between  the  endowment  system  and 
the  regular  life  insurance  is  that  the  former  pays  to  the  holder  while  living 
the  face  of  the  bond  or  certificate,  while  the  latter  pays  to  his  legatee  the 
face  of  the  policy  after  death.  The  endowment  or  distinguishing  feature 
of  all  these  associations  consists  in  a  contract  or  agreement  to  pay  a  fixed 
sum,  generally  from  $250  to  $1,000,  at  certain  stated  periods  of  time.  As 
a  rule  these  periods  are  fixed  at  intervals  regulated  according  to  the  age  of 
the  individual  who  becomes  a  member.  In  most  of  the  associations  the 
age  of  said  member  is  deducted  from  seventy-five  years  and  the  result 
divided  by  the  number  of  coupons  attached  to  the  certificate.  For  exam- 
ple, if  a  man  upon  entering  was  thirty-five  years  old  and  there  were  ten 
coupons  of  $500  each  attached  to  his  certificate  of  membership,  as  the 
difference  between  thirty-five  and  seventy-five  years  is  forty  he  would  be 
entitled  to  receive  $500  at  intervals  of  four  years,  the  result  of  dividing 
the  forty  years  by  ten,  the  number  of  coupons. 

Of  coarse,  as  the  interval  of  payments  is  the  shorter  the  greater  the  age 
of  the  member,  so  also  the  amount  of  assessment  to  be  levied  in  order  to 
pay  the  coupons  is  increased  according  to  age. 

Some  of  these  endowment  schemes  divide  the  intervals  at  which  coupons 
are  to  be  paid  irrespective  of  the  age  of  the  member,  and  vary  the  assess- 
ment schedule  accordingly. 

For  example,  the  intervals  would  be  divided  into  three  classes  called  A, 
B,  C,  the  coupons  being  made  payable  at  intervals,  respectively,  of  five 
years  in  Class  A,  four  years  in  Class  B,  and  three  years  in  Class  C.  The 
assessments  to  be  paid  in  the  last,  or  Class  C,  would  of  course  be  higher 
than  in  the  others,  and  those  to  be  paid  in  Class  B  higher  than  in  Class  A. 

Many  of  these  associations  discard  the  death  benefit  entirely,  so  that  in 
case  of  death  the  beneficiary  named  in  the  certificate  of  membership  has 
to  continue  the  payment  of  dues,  assessments,  etc.,  the  same  as  the  original 
holder,  or  forfeit  all  moneys  previously  paid  in.  Under  such  a  plan  why 
there  should  be  an  artificial  regulation  of  intervals  according  to  the  age  of 
a  member  when  coupons  become  due  and  payable  is  somewhat  perplexing. 
The  boy  of  sixteen  and  the  old  man  of  seventy  are  on  the  same  plane 
when,  in  case  that  death  intervenes,  the  payment  of  assessments  must  be 
continued  by  the  living  legatee.  It  is  simply  done  to  give  the  plan  an 
insurance  air,  by  throwing  a  mysterious  glamour  in  the  form  of  a  schedule 
of  figures  and  tables  by  which  the  thing  has  been  and  can  be  solved. 

The  division  of  periods  into  classes  of  two,  three,  four,  etc.,  as  before 
mentioned,  and  assessing  the  members  accordingly,  is  the  intelligible 
method  under  such  a  scheme.  Some  pay  the  full  amount  of  the  next  to 
mature  coupon  in  case  of  death.  Some  pay  only  a  small  amount  for 
funeral  expenses,  but  no  coupon  or  insurance. 

Where  there  is  no  death  benefit  or  insurance,  no  medical  examination  is 
required  upon  admission.  This  feature  now  seems  to  be  most  popular. 
The  dislike  to  undergo  such  an  examination,  coupled  with  the  desire  to 
get  hold  of  a  lump  sum,  instead  of  leaving  it  to  legatees,  attracts  the  multi- 
tude. It  is  therefore  not  surprising  that  the  endowment  associations  which 
have  no  policies  to  pay  in  case  of  death,  and  require  not  the  services  of  a 
medical  examiner,  are  the  ones  with  by  far  the  largest  membership.  Such 
a  system  may  be  considered  mercenary  and  selfish.  A  member  of  an 
endowment  association  insures  for  himself,  and  not  for  his  family.  The 
helplessness  of  orphan  children  and  the  forlorn  condition  of  the  penniless 
widow  are  often  forgotten  in  the  carnal  desire  to  "eat,  drink,  and  be 
merry,"  and  let  the  future  take  care  of  itself. 


17 

ASSESSMENTS   AND   DUES. 

The  certificate  of  membership  contains  the  gross  sum  for  which  a  person 
is  insured,  and  the  coupons  attached  the  fractional  part  of  said  amount, 
obtained  by  dividing  it  by  the  number  of  coupons.  If  the  certificate  is  for 
$5,000,  and  there  are  ten  coupons,  each  coupon  would  be  for  $500;  if  eight 
coupons,  $625,  and  so  on.  In  some  associations  the  number  of  coupons 
attached  to  certificates  is  the  same  to  all  members.  In  others  the  number 
is  regulated  according  to  age.  For  example,  all  who  enter  under  forty-five 
years  may  be  entitled  to  ten  coupons,  and  after  that  age  to  eight,  six,  etc., 
as  may  be  set  forth  in  the  by-laws. 

Some  of  them  increase  the  assessment  upon  the  members  as  they  advance 
in  years,  while  others  let  it  remain  fixed  as  it  was  on  the  day  when  the 
member  joined  the  association. 

The  amount  of  the  entrance  fee  varies  according  to  the  amount  for  which 
a  person  insures,  and  runs  from  about  $5  to  $30.  Quarterly  dues  are 
usually  about  50  cents  a  month,  but  often  exceed  this  amount.  Transfer 
fees  of  from  $1  to  $3  are  charged  when  a  member  transfers  his  stock  to 
another  or  when  he  changes  the  name  of  his  beneficiary.  These  fees  and 
dues  go  to  the  expense  fund.  In  many  of  the  associations  it  is  provided 
that  any  surplus  remaining  shall  revert  to  the  assessment  fund  for  the 
benefit  of  the  members. 

In  the  short  experience  we  have  had  of  their  practices,  a  deficiency 
instead  of  a  surplus  is  usually  seen  in  the  expense  funds.  The  proprietary 
endowment  concerns  do  not,  with  one  or  two  exceptions,  publish  detailed 
reports  of  their  financial  operations,  especially  as  to  what  becomes  of  the 
fees  and  dues  that  go  into  the  expense  fund. 

From  the  death-bed  developments  of  the  ephemeral  endowments  that 
"  fretted  their  busy  hour  "  in  this  State,  it  appears  that  the  inside  plotters 
and  schemers  not  only  gobbled  all  the  cash  of  the  expense  fund,  but  every 
dollar  for  beneficiary  or  other  purposes  which  they  could  lay  their  hands 
on  when  the  crash  came.  With  this  class  the  scheme  of  mutual  self-endow- 
ment is  a  game  of  self-enrichment. 

NO   PRINTED   BY-LAWS. 

Another  most  significant  fact  is  that  very  few  of  these  proprietary  endow- 
ment concerns  publish  their  by-laws.  Both  in  the  form  of  application  and 
in  the  certificate  of  membership  a  member  promises  to  obey  the  by-laws  of 
the  association,  and  no  copy  of  these  laws  is  placed  in  his  hands.  He 
therefore  promises  to  comply  with  conditions  and  obey  laws  he  knows 
nothing  about.  When  asked  for  a  copy  of  their  by-laws,  the  answer  is 
that  they  have  not  been  printed  because  of  the  expense.  Such  was  the 
answer  given  by  the  Secretary  of  the  Guaranty  Endowment  Benevolent 
Association,  which  claims  to  have  over  two  thousand  members.  In  the 
face  of  the  large  amount  received  for  admission  fees  (more  than  $10,000) 
and  quarterly  dues,  the  plea  that  the  institution  could  not  aff'ord  the  small 
expense  of  printing  their  laws  is  very  weak  indeed.  They  could  afford  to 
spend  a  large  amount  in  fitting  up  their  offices,  but  not  the  few  dollars 
required  for  printing.  The  so  called  cooperative  association  that  will  not 
print  or  distribute  the  laws  which  govern  it,  deserves  to  be  placed  in  the 
suspicious  class  ipso  facto. 

When  additions  and  alterations  are  made  in  the  laws  the  naembers  are 
not  notified  of  the  fact.  In  the  open  investigation  the  President  of  the 
Western  Mutual,  when  asked  "  How  can  the  members  be  informed  of  a 

2-L 


18 

change  in  your  by-laws  when  they  are  not  printed  ?  "  was  unable  to  answer. 
Who  can  tell  anything  about  the  plans  and  practices  of  these  organiza- 
tions under  such  circumstances  without  overhauling  the  books  in  their 
offices  where  such  rules  are  written  ? 

Why,  its  own  members  cannot  tell  how  the  laws  of  the  organization  can 
be  or  have  been  enacted,  altered,  or  amended.  They  do  not  understand 
what  power  is  vested  in  the  five  gentlemen  who  have  the  management  in 
their  hands — how  or  when  they  were,  or  are  to  be,  elected,  or  what  is  their 
term  of  office. 

SURREPTITIOUS   CHANGING   OF   BY-LAWS. 

In  the  testimony  given  before  me  by  Mr.  J.  H.  Leonard,  City  Treasurer 
of  San  Jose,  it  was  shown  that  the  Directors  of  the  Western  Mutual  Bene- 
fit Association  so  changed  the  laws  of  the  association  that  the  terms  of 
their  contract  with  the  membership  were  altered  in  order  to  deprive,  if 
possible,  a  poor  widow  of  her  just  claim  against  the  Western  Mutual. 

If  printed  and  distributed  the  members  would  be  in  a  position  to  learn 
that  these  by-laws  are  often  changed  to  suit  the  purposes  of  the  officers. 
It  has  been  the  practice  to  have  the  by-laws  so  drawn  at  the  time  of  organiza- 
tion that  the  periods  of  maturity  of  coupons  shall  be  short  and  the  assess- 
ments small,  in  order  that  the  inside  managers  may  be  the  first  to  cash 
coupons  and  entice  others  to  become  members.  After  a  time  the  by-laws 
are  amended  and  a  new  assessment  and  maturity  table  is  formulated  with 
higher  assessments  and  longer  periods  of  maturity,  so  that  while  a  charter 
member  can  get  his  coupon  cashed  in  from  two  to  three  years,  a  later 
member  of  the  same  age  will  have  to  wait  a  much  longer  time. 

Authority  to  amend  the  by-laws  generally  rests  with  the  officers,  thus 
obviating  the  necessity  of  calling  a  meeting  of  the  members.  Officers  are 
not  obliged  to  give  any  notice  of  their  intention  to  alter  the  laws  and  are 
not  limited  to  any  particular  occasion,  but  may  do  so  at  any  time.  Their 
law-making  power  is  as  unrestricted  as  that  of  an  eastern  autocrat.  If 
any  inquisitive  member,  exercising  his  right  under  any  existing  law,  should 
attempt,  for  instance,  to  examine  the  cash  accounts  he  could  be  told  to 
call  again  in  a  few  hours,  and,  in  the  mean  time,  a  private  meeting  of  the 
officers  might  be  held  and  an  amendment  to  the  by-laws,  depriving  the 
member  of  said  right,  could  be  adopted. 

In  looking  over  the  prospectus  of  the  Guaranty  Endowment  I  noticed 
that  the  coupon  maturity  and  assessments  table  was  headed  "  Department 
B."  Upon  inquiry  I  found  that  the  former  maturity  and  assessment  table, 
which  was  "  Department  A,"  had  been  withdrawn,  and  I  could  not  procure 
a  copy.     Why  it  was  withdrawn  I  could  not  discover. 

The  Mutual  of  Oakland,  according  to  the  Secretary,  has  about  doubled 
its  rates  of  assessments.  About  two  hundred  of  the  original  members 
enjoy  the  privileges  of  the  old  tables,  and  are  thus  enabled  to  get  their 
coupons  cashed  for  far  less  money  than  those  who  entered  later.  All  the 
members  of  the  Mutual,  according  to  the  testimony  of  its  Secretary,  are 
duly  notified  of  any  change  made  in  the  by-laws. 

The  Eureka  Endowment,  which  has  about  fifteen  hundred  members, 
increased  the  original  rate  of  assessment  about  20  per  cent,  and  at  the 
same  time  lengthened  the  "  maturity  table."  For  example,  the  assessment 
on  a  $5,000  certificate  for  a  person  of  from  thirty-five  to  forty  years  of  age 
in  the  old  table  was  $2  50.  In  the  new  it  is  $3  05.  The  coupon  of  a  man 
fifty  years  of  age  matured,  according  to  the  old  table,  in  two  and  one  half 
years;  in  the  new  it  will  take  three  years  and  four  months.     The  old 


19 

people  who  were  early  in  the  field  have,  accordingly,  much  the  advantage 
over  the  late  arrivals. 

WHY   ASSESSMENTS   ARE   POSTPONED. 

In  some  the  levying  of  assessments  for  the  benefit  or  endowment  fund 
begins  from  the  date  of  organization.  In  others  it  is  deferred  for  from  one 
and  a  half  to  two  years,  until  they  gather  a  large  number  into  the  fold. 
The  fact  that  assessments  will  not  be  levied  for  a  considerable  period  is  a 
strong  inducement  to  people  to  join,  so  that  they  may  rank  among  the  first 
to  get  their  coupons  cashed.  Besides,  it  is  a  great  satisfaction  to  be  assured 
that  the  period  of  the  maturity  of  your  coupon  is  growing  daily  less,  while 
you  are  not  called  upon  to  contribute  a  dollar  towards  its  redemption. 
People  do  not  stop  to  ask  themselves  where  the  money  is  to  come  from  that 
will  redeem  these  coupons.  ''  Grapes  do  not  grow  upon  thistles,  nor  figs 
upon  thorns."  It  must  be  evident  that  where  the  increment  of  profit  does 
not  grow  at  the  ordinary  business  rate,  the  increase  must  come  from  the 
pockets  of  victims.  Somebody  has  to  pay  the  piper,  and  each  member 
lives  on,  pays  on,  in  the  hope  that  he  is  not  to  be  among  the  unlucky  ones. 
In  the  meantime  fees  and  dues  are  pouring  into  the  expense  fund,  which 
is  sacred  to  the  uses  of  the  officers  and  Directors. 

The  Pacific,  organized  March  8,  1888,  will  not  begin  to  levy  assessments 
until  January  1,  1890,  or  after  a  period  of  more  than  one  year  and  nine 
months. 

The  Guaranty,  incorporated  July  19,  1888,  will  not  do  the  same  until 
June  1,  1890,  or  in  one  year  and  ten  and  one  half  months. 

The  Eureka,  incorporated  November  5,  1888,  will  not  do  the  same  until 
June  1,  1890,  or  in  one  year  and  seven  months. 

From  the  very  date  of  organization  they  have  entered  into  a  contract 
with  their  members  to  pay  them  a  certain  amount  in  a  certain  time,  and 
still  allow  a  considerable  portion  of  that  time  to  elapse  without  demanding 
a  dollar  for  investment  as  an  increment  of  profit.  Take  an  original  mem- 
ber of  the  Eureka,  for  example,  of  fifty  years  of  age,  who  takes  out  a 
certificate  for  $5,000.  How  much  has  he  to  pay,  provided  he  becomes  a 
member  at  the  date  of  the  organization,  November  5,  1888?  His  first 
coupon  for  $500  will  mature  in  two  and  one  half  years,  that  is,  on  May  5, 
1891.  He  pays  for  admission  fee  $5;  quarterly  dues,  at  $6  per  year,  $15; 
and  monthly  assessments  from  June  1,  1890 — that  is  twelve  months — at 
$3  35  per  month,  which  amount  to  $40  20,  making  a  total  in  all  of  $60  20. 
For  this  he  receives  $500. 

Happy  pioneer  of  the  Eureka  Endowment,  you  can  well  cry  "  Eureka" 
when  you  pocket  the  twenty-five  shining  $20  gold  pieces  in  exchange  for 
the  three  you  paid  in.  How  is  it  with  the  man  who  comes  later?  The 
member  of  the  same  age  who  takes  out  a  certificate  of  $5,000  on  the  first 
day  of  June,  1890,  will  not  be  so  fortunate  as  the  pioneer  referred  to.  The 
fees  and  the  dues  will  be  the  same — $20 — but  he  will  have  to  pay  monthly 
assessments  for  three  vears  and  four  months,  at  $4  20  per  month,  amount- 
ing to  $168,  making  a"  total  of  $188. 

He  will  have  to  pay,  then,  more  than  three  times  as  much  money  and 
have  to  wait  nearly  a  year  longer  than  the  pioneer  Eurekan  before  he  can 
march  off"  with  his  $500.  Hence  it  will  be  seen  that  the  "  early  bird,"  in 
the  endowments,  is  the  one  most  likely  to  "catch  the  worm." 

The  early  member  in  the  Pacific  and  in  the  Guaranty  enjoy  still  greater 
advantages  over  the  one  who  comes  in  after  the  assessments  begin,  because 
they  have  a  longer  period  of  non-assessment  than  in  the  Eureka.     An 


20 

original  member  of  thirty-five  years  of  age  in  the  Pacific  would  have  to 
pay  assessments  for  only  two  years  and  a  quarter,  when  he  would  be 
entitled  to  cash  for  his  coupon,  while  the  one  of  the  same  age  who  comes 
in  after  January  1, 1890,  must  pay  assessments  for  four  years.  The  former 
has  to  pay  in  assessments  only  $60  75  for  his  $500,  while  the  latter  has  to 
pay  $108.  What  can  be  said  of  a  business  enterprise  which  admits  of 
such  gross  incongruities  and  palpable  favoritism  ? 

Take,  for  example,  one  thousand  members  of  the  Pacific,  who  had  the 
good  fortune  to  join  at  an  early  date.  They  would  have  paid  in  $60,750, 
and  be  entitled  to  draw  out  $500,000. 

As  the  average  rate  of  assessment  amounts  to  $27  per  year,  it  would 
take  a  thousand  members  nearly  twenty  years  to  pay  this  sum,  or  five 
thousand  members,  nearly  four  years.  In  all  human  probability  before 
this  devoutly  to  be  wished  realization  of  the  expectation  of  said  one  thou- 
sand pioneers,  the  Pacific  will  have  gone  the  way  of  all  endowments,  leav- 
ing thousands  of  mourners  behind,  who  had  not  come  within  hailing 
distance  of  the  promised  coupon. 

The  Secretary  of  the  Pacific,  in  his  first  annual  report,  states  that  one 
hundred  and  twenty-four  coupons  of  $500  each,  amounting  to  $62,000,  fall 
due  in  the  year  1890.  As  the  average  assessment  per  year  is  $27,  the  for- 
tunate members  who  will  pocket  the  $62,000  will  have  to  pay  in  assess- 
ments only  $2,348,  and  will  make  a  clear  gain  of  $473  on  an  investment 
of  only  $27. 

In  the  following  year  coupons  on  four  hundred  and  twenty-three  certifi- 
cates, amounting  to  $211,500,  fall  due.  The  happy  owners  of  these  certifi- 
cates will  have  to  pay  in  assessments  from  $27,  beginning  the  year,  up  to 
$54  at  the  end,  or  an  average  say  of  $45.  They  will  have  paid  in,  there- 
fore, $19,035,  and  be  entitled  to  draw  out  $211,500. 

Prodigious  profits!  During  the  first  two  years  of  assessments — that  is, 
in  the  years  1890  and  1891 — five  hundred  and  forty-seven  members,  who 
will  pay  in  only  $21,383,  will  draw  from  the  treasury  of  the  Pacific  $273,- 
500.  The  average  amount  paid  is  less  than  $40  for  each  member,  for  which 
he  is  entitled  to  draw  $500.  Who  are  to  be  the  fortunate  drawers  of  the 
prizes?  Who  will  be  the  happy  five  hundred  that  will  make  this  glorious 
raid  upon  the  treasury?  It  is  to  be  presumed  that  the  nine  perpetual 
Directors  of  the  Pacific  will  look  out,  not  only  for  their  own  individual 
interests,  but  for  that  of  their  friends,  during  these  two  fruitful  years.  It 
would  indeed  be  interesting  to  know  who  are  the  one  hundred  and  twenty- 
four  members  entitled  to  draw  $500  each  during  the  last  four  months  of 
next  year  from  the  treasury  of  an  association  organized  March  8,  1888. 
The  Secretary  states  that  the  average  coupon  maturity  is  four  years  and 
one  month,  but  these  fortunate  insiders  will  draw  $62,000  long  before  the 
Pacific  reaches  the  age  of  three  years. 

GROUND   PLAN   OF    ENDOWMENTS. 

The  following  classification  indicates  to  some  extent  the  ground  plan  of 
many  of  these  schemes: 

1.  Certificate  of  membership,  with  coupons  attached,  payable  at  certain 
intervals,  but  in  case  of  death,  the  full  face  of  the  certificate  is  to  be  paid, 
less  amount  of  coupon,  if  any,  previously  cashed. 

2.  Same  as  No.  1,  but  only  the  next  maturing  coupons  to  be  paid  in  the 
event  of  death. 

3.  Same  as  No.  1,  but  nothing  to  be  paid  at  death,  except  a  small  benefit 
for  funeral  expenses. 


21 

4.  Same  as  No.  1,  but  nothing  at  death.  The  beneficiary  named  in  cer- 
tificate can  continue  payments  until  next  coupon  matures. 

5.  Same  as  No.  1,  with  benefits,  in  case  of  sickness  or  accident,  added. 

6.  All  or  a  portion  of  the  assessments  paid  back  to  members,  under  con- 
ditions, and  at  stated  periods. 

THE    EQUITY   BENEFIT. 

One  of  these,  known  as  the  ''Equity  Benefit  Association,"  charges  for 
admission  fees  from  $8  to  $15,  and  for  annual  dues  from  $5  to  $20.  Ten 
per  cent  is  taken  off  the  receipts  for  assessments,  which  run  from  $2  50  to 
$10 per  month,  for  a  reserve  fund.    The  plan  of  the  "Equity"  is  as  follows: 

On  the  last  day  of  each  month  the  amount  in  the  benefit  fund  shall  be  disbursed  to 
the  members  in  good  standing  in  the  following  order;  First,  one  tenth  of  certificate  ISo. 
1  shall  be  paid  in  full  if  due  by  maturity,  otherwise  the  holder  of  the  certificate  shall  be 
paid  double  the  amount  he  or  she  has  paid  into  the  Association  and  be  required  to  accept 
such  amount  in  fidl  payment  of  one  tenth  of  certificate,  and  shall  be  furnished  a  new  cer- 
tificate for  one  tenth  less  than  the  original  certificate,  bearing  new  member  and  date,  and 
maturing  accordingly,  the  same  as  a  new  certificate.  Then  one  tenth  of  certificate  No.  2 
shall  be  paid  in  the  same  manner,  and  so  on,  payments  being  made  on  the  first  part  of 
each  certificate  to  members  in  good  standing  in  regular  numerical  order,  until  the  amount 
in  the  benefit  fund  is  exhausted,  or  until  the  balance  left  in  the  fund  is  not  sufficient  to 
pay  the  certificate  next  due  double  the  amount  received  on  that  certificate.  On  the  last 
day  of  the  next  month  the  first  part  due  of  certificate  next  to  the  one  paid  last  shall  be 
paid  in  accordance  with  the  above  plan,  and  each  other  certificate  in  regular  numerical 
order,  until  the  fund  is  again  exhausted,  and  so  on  each  succeeding  month  thereafter. 

This  is  one  of  the  associations  having  a  reserve  fund.  Besides  the 
very  large  membership  fees  and  semi-annual  dues  which  go  to  the  expense 
fund,  10  per  cent  of  the  monthly  assessments  are  also  taken  from  the 
members  and  put  into  what  is  called  a  reserve  fund. 

In  some  of  the  best  conducted  fraternal  organizations  they  have  nc 
reserve  fund.  Such  funds,  though  essential  in  a  well  managed  insurance 
company,  are  a  standing  temptation  to  fiduciary  officers  in  the  endow- 
ments, and  the  establishment  of  them  is  a  return  to  the  old  insurance 
methods,  which  cooperatives  rebelled  against.  In  the  bursted  concerns 
no  trace  of  any  coin  in  the  reserve  fund  could  ever  be  discovered.  It  was 
reserved  for  the  managers. 

The  "Equity  Benefit"  has  about  six  hundred  members.  Although 
incorporated  since  February  5, 1886,  no  laws  governing  it  have  been  printed. 
The  members  are  therefore  groping  in  the  dark  cooperatively.  Any  person 
of  ordinary  intelligence  can  see  at  a  glance  that  the  scheme  is  designed  to 
put  money  in  the  purse  of  the  few  who  first  become  members,  and  there- 
fore have  the  lowest  numbered  certificates.  The  advantage  of  this  plan 
over  others  is  that  the  managers,  or  the  insiders,  have  not  to  wait  very  long 
for  their  share  of  the  profits,  as  they  are  divided  monthly. 

THE    FIDELITY. 

The  Fidelity  Endowment  is  somewhat  upon  the  same  plan  as  the 
Equity,  and  under  its  "  first  series,"  or  original  plan,  considerately  prom- 
ised its  members  double  the  amount  they  had  subscribed.  Finding  that 
it  could  not  stand  the  strain  upon  its  resources,  it  wisely  reduced  the 
amount  to  50  per  cent  upon  the  investment.  The  double  payment  plan 
would  work  as  follows : 

Suppose  twenty  members  organize,  at  the  end  of  the  first  month  the  first 
ten  on  the  roll  would  pocket  double  the  amount  they  had  paid  in,  or  the  whole 
proceeds  paid  in  by  the  twenty.     At  the  end  of  the  next  month  the  receipts 


22 

of  forty  members  would  be  required  to  pay  the  second  ten  double  what 
they  had  paid  in.  To  pay  the  next  twenty  double  what  they  had  paid  in 
would  require  eighty  new  members,  and  so  on  increasing  at  a  ratio  which 
would  quickly  reach  the  millions.  In  the  meantime  the  members  who 
originally  doubled  their  money  would  be  paying  assessments  for  those  that 
followed,  without  any  hope  that  it  would  ever  come  to  their  turn  again. 

Experience  has  shown  that  they  are  not  such  fools.  Some  of  the 
pioneers,  having  pocketed  100  per  cent  on  their  investment,  quietly  stood 
from  under,  and  departed. 

THE   NATIONAL. 

Another,  called  the  "National  Endowment  Association,"  promises  to 
pay  at  the  end  of  each  year  $200  for  a  monthly  assessment  of  $5;  that  is, 
to  disburse  $200  for  $60  received.  No  limit  to  the  number  of  shares! 
This  is  such  an  outrageous  and  barefaced  scheme  to  perform  impossibil- 
ities, that  it  is  almost  incredible  that  any  one,  except  a  person  demented, 
could  take  stock  in  it. 

From  all  that  I  can  learn,  it  is  a  corporation  sole.  A  single  individual 
is  "  polyofficered,"  like  the  Grand  High  Executioner  in  the  Mikado,  and  is 
President,  Secretary,  Treasurer,  and  Finance  Committee  rolled  into  one. 

Ten  per  cent  of  this  scheme  also  goes  to  the  reserve  fund,  so  that 
actually  the  National  promises  to  pay  $200  for  $54  in  a  single  year.  For  a 
time  the  names  of  the  officers  of  this  concern  were  printed  in  the  pros- 
pectus, but  in  consequence  of  exposure  in  the  press  the  names  are  now 
omitted  altogether.  A  letter  of  inquiry  about  it  from  Michigan  was  referred 
to  me  by  the  Mayor  of  San  Francisco,  which  shows  that  agents  are  employed 
to  take  in  gudgeons  in  other  States. 

THE  EAGLE. 

"The  Eagle  Insurance  Society"  offers  to  insure  any  one,  young  or  old, 
for  gis  many  thousand  dollars  as  they  may  see  fit  to  pay  for.  No  medical 
examination  required. 

In  this  society  the  following  plan  of  mutual  endowment  insurance  is 
exploited:  Any  person,  male  or  female,  old  or  young,  may  apply  for  mem- 
bership, and,  if  accepted,  become  a  member  on  paying  an  entrance  fee 
of  $10  and  $5  for  each  subsequent  $1,000,  with  monthly  dues  of  $1  25,  of 
which  $1  shall  go  to  the  reserve  fund.  The  benefits  claimed  for  this 
system  are  that  for  each  $1,000  paid  into  the  reserve  fund  the  member 
in  good  standing  holding  the  lowest  number  of  membership  in  the  society 
shall  be  entitled  to  $1,000.  Should  a  member  die  before  his  or  her  endow- 
ment becomes  due,  and  be  at  the  time  of  death  in  good  standing,  the 
amount  paid  by  him  or  her  will  be  refunded  to  the  legal  representatives  of 
the  deceased. 

In  the  application  it  is  set  forth  that  the  member  "shall  be  subject  to 
the  rules  and  regulations  of  the  constitution  and  by-laws  of  this  associa- 
tion, as  they  now  read,  and  any  new  section  which  may  be  hereafter  added, 
and  all  the  alterations  and  amendments  which  may  be  made  and  adopted 
from  time  to  time." 

As  a  sort  of  a  spur  to  the  energies  of  the  society,  the  following  sentence 
is  printed  on  the  back  of  the  circular:  "  Our  members  are  requested  to  dis-- 
tribute  these  circulars;  we  want  to  run  our  membership  to  a  million." 

Let  us  take  the  statement  in  the  circular  of  the  Eagle  Insurance  Society 
that  they  want  a  million  members,  and  assume,  for  purposes  of  illustra- 


23 

tion,  that  they  have  one  million  members.  With  one  million  persons  pay- 
ing $10  initiation  expenses  the  promoters  of  the  society  secure  at  the  outset 
a  nest  egg  of  $10,000,000,  and  as  this  membership  of  one  million  will  pay 
during  the  first  year  $3,000,000  for  running  expenses,  at  25  cents  per  capita  a 
month,  and  $12,000,000  into  the  surplus  fund  at  the  rate  of  $1  per  capita  per 
month,  we  will  have  at  the  year's  end,  according  to  the  circular  of  the 
company,  only  $12,000,000  to  draw  from,  as  there  is  nothing  in  the  appli- 
cation securing  the  $10  initiation  fee  as  a  fund  available  to  the  members. 

We  will  say  in  the  first  year  of  the  existence  of  the  Eagle  Insurance 
Society  twelve  thousand  members  receive  $1,000  each  of  the  total  of  the 
reserve  fund  of  $12,000,000.  That  will  leave  nothing  on  hand  for  the 
remaining  membership  of  nine  hundred  and  eighty-eight  thousand  persons, 
who  all  expect  to  receive  $1,000  each,  or  a  total  of  $988,000,000. 

Of  course  in  the  absence  of  medical  examinations,  and  the  uniform  rate 
for  the  infant  and  the  octogenarian,  the  death  ratio  will  be  frightfully 
increased,  as  compared  with  the  experience  of  long  established  insurance 
companies,  and  there  must  be  a  constant  army  of  recruits  coming  in  to 
keep  up  the  payments;  but  as  to  this  payment  question  it  will  be  seen,  by 
reference  to  the  application  blank  of  the  company,  that  its  provisions  and 
responsibilities  are  subject  to  alteration  and  future  amendments. 

Suppose  a  man  dies,  the  society  will  give  him  back  the  money  he  had 
paid  into  the  surplus  fund;  that  is  to  say,  $1  per  month;  but  it,  of  course, 
does  not  return  the  additional  25  cents  per  month,  which  goes  into  the 
expense  account  of  the  society.  He  has  virtually  been  paying  25  per  cent 
interest  to  the  society  to  take  care  of  his  money  for  him. 

THE   YOUNG   PEOPLE'S. 

The  Young  People's  Insurance  Society  is  another  of  the  same  character, 
in  San  Francisco,  only  substituting  $100  for  the  $1,000  certificates. 

They  are  far  worse  than  a  lottery  scheme,  for  in  the  latter,  if  honestly 
conducted,  all  stand  upon  the  same  plane  and  have  an  equal  chance  of 
drawing  a  prize,  but  in  the  former  the  prizes  fall  to  the  few  on  the  inside 
who  hold  the  lowest  numbered  certificates. 

THE   PACIFIC   ENDOWMENT    LEAGUE. 

"  The  Pacific  Endowment  League  "  was  organized  March  8,  1888.  The 
management  is  in  the  hands  of  nine  Directors. 

These  gentlemen  formulated  what  is  called  a  "Code  of  Laws,"  which  is 
so  ingeniously  drawn  as  to  confer  perpetual  and  almost  absolute  control  in 
their  own  hands. 

Article  I  of  this  code  provides:  There  shall  be  a  Board  of  nine  Directors, 
invested  with  full  power  and  authority  to  enact  laws  for  the  government  of 
the  league,  and  who  shall  choose  from  among  their  number  a  President,  a 
Vice-President,  a  Secretary,  and  a  Treasurer. 

Although  the  organization  boasts  of  having  more  than  five  thousand 
members,  these  nine  members,  who  constitute  the  directory,  have  alone 
the  power  to  enact  laws  binding  upon  all.  Nowhere  else  in  this  remark- 
able "code"  does  it  state  how  these  laws  can  be  altered  or  amended.  Is 
this  cooperation?  Is  this  giving  each  and  every  member  an  equal  voice  in 
the  framing  of  laws  governing  the  whole  ? 

No  time  or  place  is  set  in  the  code  when  or  where  the  laws  can  be  so 
enacted  by  these  nine  Directors.  They  can  do  so  at  their  own  sweet  will 
and  pleasure. 


24 

As  the  Pacific  Endowment  League  has  never  been  incorporated  as  an 
organization  for  cooperative  purposes,  it  is  difficult  to  understand  what  the 
league  is  composed  of,  except  a  league  formed  for  purely  private  business 
purposes  by  the  nine  gentlemen  who  compose  the  directory.  If  all  the 
members  constitute  the  league,  why  should  not  the  orgai^ization  be  made 
a  legal  body  by  incorporation  ? 

How  can  the  rights  of  the  individual  members  be  guarded  and  protected 
in  any  Court  of  law  under  such  circumstances  ?  In  whose  name  can  suits 
be  entered  or  defended  ?  What  recourse  has  an  aggrieved  member  against 
the  organization? 

As  it  is  not  an  incorporated  body,  then  who  adopted  this  code  of  laws, 
and  by  whom  can  they  be  altered  or  amended  ?  There  is  no  provision  in 
this  remarkable  code  of  laws  for  the  election  of  officers  at  stated  periods. 

THE   PACIFIC   A    SHAM   COOPERATIVE. 

As  there  is  no  term  of  office  specified,  the  gentlemen  elected  may  be 
considered  permanent  or  life-term  officers,  who  can  play  battledore  and 
shuttlecock  with  the  "code  of  laws."  They  have  full  power  to  fill  all 
vacancies.  The  code  provides  that  an  annual  meeting  of  the  members 
shall  be  held  at  San  Francisco  on  the  first  Tuesday  of  May,  1890,  and  on 
the  first  Tuesday  of  May  of  every  year.  At  such  meetings  two  thirds  of 
the  entire  membership  shall  constitute  a  quorum  for  the  transaction  of  busi- 
ness. Suppose  they  had  seven  thousand  five  hundred  members  on  their 
roll  next  May,  there  must  be  at  least  five  thousand  members — two  thirds 
of  seven  thousand  five  hundred — on  hand  at  the  meeting  before  any  busi- 
ness could  be  transacted.  Even  if  the  membership  did  not  exceed  six 
thousand,  the  officers  would  have  to  rent  the  Mechanics'  Pavilion  in  San 
Francisco,  for  their  meeting,  to  accommodate  the  four  thousand  members 
who  constitute  a  quorum.  There  is  no  provision  in  the  by-laws  for  voting 
by  proxy.  Members  would  have  to  flock  in  from  remote  States  and  Terri- 
tories to  attend  this  annual  meeting,  and  for  what  purpose?  To  elect  three 
Directors — nothing  more.  "The  mountains  have  labored,  and  a  miserable 
mouse  is  brought  forth."  It  is  a  transparent  humbug  for  these  four  thou- 
sand members  to  come  together  and  not  have  a  voice  in  the  alteration  or 
amendment  of  their  code  of  laws  or  in  the  election  of  a  President,  Vice- 
President,  etc.  The  remaining  six  Directors  would  still  hold  the  fort, 
having  the  power  to  remove  the  three  so  elected  upon  charges  preferred. 
But, it  maybe  argued,  such  things  cannot  be  done  under  the  Civil  Code  of 
California,  which  safely  guards  and  protects  the  rights  of  the  members. 
Yes,  if  it  is  an  incorporated  organization.  But  the  Pacific  Endowment 
League  of  San  Francisco  is  not,  and  the  members  are  at  the  mercy,  pleas- 
ure, and  good  will  of  the  nine  gentlemen  who  constitute  the  directory. 
How  can  the  members  of  such  an  organization  have  any  rights  or  privileges 
not  expressly  given  and  held  in  leash  by  the  nine  gentlemen  composing 
the  directory?  It  must  be  concluded,  therefore,  that  the  cooperative  fea- 
tures of  the  scheme  are  a  mockerv  and  a  delusion. 


The  Bankers'  Mutual  Relief  of  San  Francisco,  in  the  laws  governing 
the  association,  says  its  "  object  is  to  bind  together  in  mutual  interests  for 
assistance  in  case  of  sickness,  accident,  and  death,  and  to  promote  a  feel- 
ing of  friendship  and  union  of  action  in  benevolent  work." 

The  fraternal  and  cooperative  features  of  the  association  are  exemplified 


25 

in  this,  that  the  officers  of  the  association,  who,  of  course,  are  the  origi- 
nators of  the  scheme,  hold  office  for  one  year,  or  until  their  successors  are 
elected.  As  there  is  no  provision  in  these  laws  as  to  when  or  where  the 
annual  meeting  of  the  members  will  be  held,  there  is  not  much  danger  of 
the  Directors  being  disturbed.  The  laws  of  the  association  "may  be 
amended  at  any  time  by  a  majority  vote  of  the  officers." 

In  the  form  of  application  for  membership  is  the  following:  "  I  declare 
that  a  majority  of  the  Directors  of  this  association  shall  have  power,  in  my 
absence,  at  any  and  all  future  meetings  of  the  members  of  this  association, 
to  act  as  my  attorney  in  fact  and  deposit  the  vote  to  which  I  would  be 
entitled.'' 

THE   FIDELITY   MUTUAL   AID. 

The  Fidelity  Mutual  Aid  Association,  also  organized  in  San  Francisco, 
is  precisely  similar  in  its  aims  and  objects  to  the  Bankers'  Mutual  Relief. 
In  the  prospectus  is  the  following:  "  By  associating  together  acceptable 
persons  they  become  entitled,  by  a  common  bond  interest,  in  mutually  aid- 
ing each  other  during  sickness,  accident,  and  death,  and  each,  contributing 
his  mite,  succeeds  in  lifting  the  burden  from  the  other's  shoulders."  What 
beautiful,  consoling,  and  truly  fraternal  language.  How  edifying  the  idea 
of  one  brother  "lifting  the  burden  from  the  other's  shoulders."  The  true 
state  of  the  case  is  that  the  members  know  as  much  of  each  other  and  of 
what  is  being  done  in  the  "  lifting"  line  as  they  do  of  the  man  in  the  moon 
and  the  internal  affairs  of  that  satellite.  As  the  by-laws  are  not  printed, 
the  members  are  ignorant  of  what  they  are. 

In  the  form  of  application  of  the  Fidelity  Mutual  Aid,  the  same  as  in 
the  Bankers',  the  applicnnt  gives  his  power  of  attorney  to  the  Directors  to 
vote  for  him  at  all  meetings  of  the  association.  This  is  "  lifting  the  bur- 
den" of  taking  part  in  the  management  of  the  association  from  the 
shoulders  of  the  members  and  placing  it  on  those  of  the  self-sacrificing 
gentlemen  who  constitute  the  directory.  No  printed  reports  from  officers 
showing  what  had  been  done  with  the  moneys  paid  by  the  members  have 
been  distributed. 

THE   EUREKA. 

In  the  laws  governing  the  Eureka  Endowment  Association  of  nearly 
two  thousand  members,  the  Board  of  Directors  of  seven  members  are 
endowed  with  absolute  power.  They  can  "enact  and  enforce  all  such 
laws  as  they  may  at  any  time  deem  for  the  best  interests  and  welfare  of 
the  association."  It  is  significant  that  at  annual  meetings  of  the  mem- 
bers, according  to  Article  XVI  of  said  laws,  it  takes  two  thirds  of  those 
present  to  alter  or  amend  these  laws,  which  four  of  these  self-constituted 
Directors  have  in  their  power  to  do.  Remarkable  from  a  cooperative  point 
of  view!  This  Board  of  Directors  choose  from  among  themselves  a  Pres- 
ident, Vice-President,  Secretary,  and  Treasurer,  and  the  President  appoints 
a  Finance  Committee,  so  as  to  give  office  to  the  remaining  three  Directors. 
They  have  full  power  to  levy  as  many  assessments  as  they  deem  necessary. 
They  can  reject  any  applicant  for  membership. 

Like  in  the  Pacific,  it  requires  two  thirds  of  the  entire  membership  to 
constitute  a  quorum  for  the  transaction  of  business  at  the  annual  meeting. 
As  the  probabilities  of  this  proportion  ever  coming  together  are  about  as 
remote  as  in  the  case  of  the  Pacific,  before  commented  upon,  the  Directors 
of  the  Eureka  may  rest  consoled  that  they  shall  never  be  disturbed  in 
their  mutual  cooperative  benevolent  undertaking. 

In  the  same  way  it  will  be  found  upon  examining  into  the  cooperative 


26 

features  of  all  these  non-fraternal  organizations  (which  parade  the  fact 
that  their  members  have  no  lodge  meetings  to  attend)  that  the  manage- 
ment is  vested  in  a  Board  of  from  five  to  nine  Directors,  who  are  prac- 
tically irremovable.  Either  in  the  laws  framed  by  themselves,  or  in  the 
form  of  application,  or  in  the  certificate  of  membership,  there  is  inserted 
some  clause  which  will  give  them  practically,  though  not  nominally,  an 
unlimited  lease  of  arbitrary  power. 

THE   MUTUAL   OF   OAKLAND. 

In  the  certificate  of  membership  of  the  Mutual  Endowment  Association 
of  Oakland  occurs  the  following: 

A  majority  of  the  Board  of  Trustees  shall  have  power,  in  the  absence  of  the  member 
herein  named,  at  any  meeting  of  the  association,  and  in  the  absence  of  any  proxy  of  said 
member,  to  represent  and  deposit  the  vote  or  votes  to  which  said  member  shall  be  entitled. 

According  to  this,  at  the  annual  meeting  for  the  election  of  officers,  a 
majority  of  the  Directors  can  cast  the  vote  of  all  the  absent  members  who 
have  not  sent  in  proxies.  What  a  simple,  guileless  method  of  perpetuating 
their  own  term  of  office.  As  the  number  of  absentees  at  such  annual 
meetings  far  outnumber  those  present  and  voting,  the  officers  are  not  in 
much  danger  of  being  ousted.  The  Mutual  Endowment  Association  of 
Oakland,  although  more  than  five  years  in  existence,  has  never  published 
a  statement  of  the  receipts  and  disbursements  of  its  general  or  expense 
fund.  As  it  not  only  charges  high  rates  of  admission  fees,  but  also  expro- 
priates 10  per  cent  of  the  monthly  assessments  for  this  fund,  the  amount 
received  must  be  very  large.  In  most  or  nearly  all  of  the  endowment 
associations  the  monthly  assessments  are  placed,  without  any  deduction,  to 
the  credit  of  the  endowment  fund;  but  the  Mutual  is  not  satisfied  with  the 
usual  sources  of  income  for  expenses,  and  takes  10  per  cent  of  the  assess- 
ments. Have  not  the  members  a  right  to  know  what  becomes  of  their 
admission  fees  of  from  $10  to  $30;  of  their  dues  from  $3  to  $30  paid  every 
year;  and  of  one  tenth  of  their  monthly  assessments?  What  are  the  sal- 
aries paid  to  officers,  and  how  much  is  paid  for  other  expenses? 

The  financial  statement  of  the  Mutual  of  Oakland  for  the  half  year 
to  July  1,  1889,  is  similar  in  style  and  character  to  that  issued  by  an  insur- 
ance company,  and  does  not  give  such  full  details  of  receipts  and  disburse- 
ments as  would  be  expected  from  a  cooperative  undertaking.  As  in  the 
case  of  the  Pacific  of  San  Francisco,  it  may  be  intelligible  and  satisfactory 
to  the  half  dozen  gentlemen  constituting  the  directory,  but  certainly  not  to 
the  body  of  the  members.  For  the  said  half  year  $6,115,  out  of  a  total  of 
$39,000,  that  is,  about  16  per  cent,  is  transferred  to  the  reserve  fund,  which 
already  amounts  to  $50,000.  As  this  reserve  fund  expands  year  after  year 
it  will  represent  an  accumulation  taken  from  the  members  and  put  in  the 
hands  of  perpetual  Directors.  Experience  has  shown,  in  the  case  of  old 
line  insurance  companies,  that  this  leads  to  extravagance,  high  salaries, 
etc.,  and  often  to  investment  or  speculation  for  the  benefit  of  those  in  charge. 

From  a  company  or  corporation  point  of  view,  the  Mutual  of  Oakland  may 
be  a  worthy  institution  and  deserving  of  confidence.  What  I  object  to  is 
its  pretense  of  being  a  cooperative  or  mutual  association,  when  its  methods 
are  proprietary  and  similar  to  insurance  companies  that  comply  with  the 
laws  relating  to  insurance  and  are  under  the  supervision  of  the  Insurance 
Commissioner. 


27 

HOW   THE   ENDOWMENTS   FIGURE. 

Unsound  financial  schemes,  like  some  of  the  so  called  "national" 
building  and  loan  associations,  and  most  of  the  proprietary  endowment 
organizations,  have  the  happy  knack  of  so  involving  their  victims  in  an 
inextricable  maze  of  figures,  denoting  dollars  and  cents,  that  they  are 
unable  to  grasp  the  situation.  Like  the  uninitiated  struggling  with  the 
"fifteen"  puzzle,  they,  after  repeated  efforts  to  disentangle  the  problem, 
give  it  up  in  despair. 

The  Secretary  of  the  Pacific  Endowment  League,  instead  of  giving  a 
plain,  unvarnished  exhibit  of  the  financial  operations  and  conditions  of 
the  league  in  his  annual  report,  gives  one  of  those  interesting  puzzles, 
going  to  show  how  the  organization  can  fulfill  its  contract  with  the  holders 
of  coupons  for  the  next  two  years. 

There  is  not  in  said  report  a  word  or  a  figure  showing  what  has  been 
done  with  the  large  amount  of  money  contributed  by  the  members  for  the 
same  expense  fund. 

EXPENSE   FUND   OF   THE   PACIFIC. 

This  league  will  not  commence  the  levying  of  assessments  until  January 
1, 1890,  but  from  the  day  of  its  organization  it  has  collected  admission  fees 
and  quarterly  dues,  which  go  to  the  expense  account.  Let  us  see  how  much 
has  been  collected  under  these  two  items.  It  costs  members  $5  admission 
fee,  and  $1  50  per  quarter  for  dues.  Consequently  the  five  thousand  two 
hundred  and  eighty  members  must  have  paid  in  $26,400  admission  fees. 
As  each  one  must  pay  the  first  quarterly  dues  in  advance,  one  quarter's 
dues,  or  $7,920,  must  be  added  to  the  former  amount,  making  a  total  of 
$34,320. 

The  league  has  been  in  existence  one  and  one  half  years,  or  six  quarters, 
and  as  one  quarter  has  been  reckoned,  we  must  strike  an  average  as  to  the 
amount  paid  in  for  the  remaining  five.  Take  half  the  present  member- 
ship, or  two  thousand  six  hundred  and  forty,  paying  five  quarters,  at  $1  50, 
and  we  get  $19,800.  Adding  this  to  the  former  figures,  we  get  a  grand 
approximate  total  paid  into  the  expense  fund  of  the  league  of  $54,120. 
Where  is  the  published  statement,  which  should  be  in  the  hands  of  every 
member  of  the  league,  showing  what  has  been  done  with  every  dollar  of 
this  amount? 

All  the  genuine,  well-conducted  fraternal  insurance  associations  publish 
periodical  statements,  setting  forth  the  receipts  and  disbursements  in  every 
fund  down  to  the  last  cent.  All  moneys  are  paid  out  by  a  warrant  on  the 
Treasurer,  and  the  date,  number,  amount,  and  purpose  of  each  warrant  is 
clearly  set  forth. 

From  what  has  come  to  my  knowledge,  I  find  that  most  of  the  propri- 
etary endowment  institutions  keep  their  expense  account  under  lock  and 
key.  In  the  annual  report  of  the  Secretary  of  the  Pacific  League  is  the 
following: 

We,  the  undersigned  Finance  Committee,  have  made  a  careful  examination  of  the 
books  of  the  Secretary  and  Treasurer  for  the  fiscal  year  1888-89,  and  have  found  them 
correct  in  every  particular. 

J.  MARTINS,  Chairman. 

J.  H.  STRUCKMEYER. 

JAMES  McAllister. 

Following  this  is  the  sworn  testimony  as  to  the  correctness  of  the  ac- 
counts by  an  expert  accountant.     This  is  all,  no  doubt,  very  satisfactory 


28 


to  the  perpetual  nine  Directors,  but  not  to  the  remaining  members  of  the 
"  Pacific,"  who  know  as  much  about  what  has  been  done  with  their  money 
as  they  do  about  the  internal  affairs  of  Timbuctoo.  Where  are  the  ac- 
counts which  this  finance  committee  certify  to  as  correct  ?  In  all  business 
undertakings,  cooperative  or  otherwise,  the  financial  statement  is  first  sub- 
mitted and  the  certificate  as  to  its  correctness  follows.  This  is  the  cart 
without  the  horse. 

FEASIBILITY   OF   ENDOWMENT   PLANS. 

The  Secretary  of  the  Pacific  Endowment,  in  his  report,  instead  of  giving 
a  statement  of  receipts  and  disbursements,  sets  forth  an  array  of  figures  to 
prove  the  feasibility  of  the  plan  of  the  Pacific  Endowment  League.  He 
puts  the  average  rate  of  assessments  at  $2  25  a  month,  and  the  average 
coupon  maturity  at  four  years  and  one  month.  Each  coupon  amounts  to 
$500. 

The  assessments,  at  $2  25  per  month,  amount  to  $27  per  year,  and  in 
four  years  and  one  month  will  amount  to  $110  25.  Consequently  the 
Secretary,  in  his  report,  tries  to  prove  how  it  is  feasible  to  disburse  $500  out 
of  $110  25  receipts,  or  in  other  words,  how  he  can  pay  out  $4  50  for  every 
dollar  he  takes  in. 

This  is  equivalent  to  a  promise  to  pay  about  300  per  cent  per  annum 
upon  the  investment.  What  a  run  there  would  be  on  the  savings  banks  of 
the  State,  with  their  insignificant  4  to  4^  per  cent  per  annum,  if  the  people 
placed  any  confidence  in  the  glittering  inducements  held  out  by  these 
bubble  schemes.  Unfortunately  thousands  of  persons,  chiefly  women,  are 
drawn  into  them.  The  butcher,  baker,  and  grocer  have  often  to  suffer 
that  these  women  may  be  able  to  pay  their  assessments.  The  Secretary  of 
the  Pacific  Endowment  League  gives  the  receipts  and  obligations,  by  way 
of  illustration,  for  two  years  1890  and  1891,  and  then  stops.  Amazing 
results : 

Receipts  for  the  first  eight  months  of  1890 $120,970  00 

Excess  of  receipts  during  last  four  months  of  1890 6,585  00 

Excess  of  receipts  during  1891..- 26,655  00 

Total $154,210  00 

Why  does  he  come  to  such  a  sudden  halt?  I  will  try  to  explain  why  he 
does  so,  by  taking  the  Secretary  precisely  at  his  own  averages  of  assess- 
ments and  coupon  maturity,  and  continue  his  calculation,  precisely  on  the 
same  lines,  for  two  years  and  three  months  further.  Let  us  see  if  the 
results  will  be  as  marvelous  in  producing  hundreds  of  thousands  of  dollars 
surplus  of  receipts  over  disbursements  as  before. 

Like  the  Secretary  I  will  start  out  with  six  thousand  members  on  the 
first  day  of  January,  1890,  and  add  to  that  number,  the  same  as  he  does, 
one  hundred  and  fifty  new  members  each  month.  The  problem  then  is 
simply  this: 

Six  thousand  members,  January  1,  1890,  at  $2  25 ..$13,500  00 

Six  thousand  one  hundred  and  fifty  members,  February  1,  1890,  at  $2  25 13,837  50 

And  SO  on  for  four  years  and  three  months.  Adding  all  together,  we  will 
get  as  follows: 

First  year $184,275-00 

Second  year 232,875  00 

Third  year 281,475  00 

Fourth  year 330,075  00 

First  quarter  of  fifth  year 90,112  50 

Total $1,118,812  50 


29 

This  is  the  amount  of  receipts  for  assessments  up  to  April  1 ,  1894.  The 
organization  would  then  have  passed  the  sixth  year  of  its  existence,  and 
the  number  of  members  on  the  roll,  at  the  rate  pf  increase  figured  upon, 
would  have  reached  thirteen  thousand  five  hundred.  The  Secretary  states 
that  four  years  and  one  month  is  the  average,  and  six  years  the  longest 
time  it  takes  to  mature  a  coupon.  Consequently,  at  the  lowest  possible 
estimate,  at  least  six  thousand  out  of  the  thirteen  thousand  five  hundred 
members  on  the  roll  must  have  had  their  coupons  mature  during  these 
six  years  from  the  date  of  organization.  From  the  start,  and  during  all 
that  period,  the  Pacific  has  been  issuing  certificates  with  coupons  attached. 

The  coupons  of  six  thousand  members,  at  $500  each,  would  amount  to 
$3,000,000,  and  the  account  would  therefore  stand: 

Liabilities $3,000,000  00 

Cash  on  hand - 1,118,812  50 

Deficit- — $1,881,187  50 

Instead  of  being  able  to  pay  to  the  members  $4  50  for  every  dollar  that 
they  had  paid  in,  the  Pacific  will  not  therefore  be  able  to  pay  40  cents  on 
the  dollar  in  1894.  The  further  along  our  calculations  extend  upon  the 
same  line  the  deeper  will  the  Pacific  sink  in  the  mire  of  insolvency. 

The  history  of  all  the  defunct  endowment  associations  shows  that  they 
usually  give  up  the  ghost  a  short  time  after  the  period  when  the  average 
maturity  of  their  coupons  arrives. 

Thousands  of  victims,  then,  are  made  to  realize  the  truth  of  the  uni- 
versal law  of  political  economy  and  finance,  that  enormous  profits  and 
small  risks  are  conditions  incompatible,  and  consequently  non-existent. 

FINANCIAL   PROGRAMME    OR   PROMISES   TO   PAY. 

The  following  table  gives  an  interesting  exhibit  of  the  wonderful  finan- 
cial programme  thrown  out  to  catch  the  speculative  eye  of  the  man  or 
woman  who  wants  to  make  four  or  five  dollars  out  of  one*  The  assessment 
and  maturity  tables  of  a  large  number  of  these  endowment  associations, 
whether  conducted  on  the  fraternal  or  proprietary  system,  are  so  arranged 
that  we  can  make  comparisons  on  a  unit  of  value,  as  in  the  following 
table.  The  average  age  of  a  member  is  taken  at  from  thirty-four  to  thirty- 
five  years,  and  the  value  of  the  coupon,  $500.  Where  coupons  are  issued 
for  a  different  sum,  a  calculation  is  made  so  as  to  bring  the  amount  of 
assessment  to  cover  $500.  For  example,  where  the  coupon  was  for  $200, 
two  and  a  half  times  the  assessments  was  figured  on,  and  so  on.  Here 
are  classed  together  the  fraternal  or  cooperative  and  the  proprietary;  but, 
as  I  before  pointed  out,  there  is  a  wide  line  of  demarkation  between  the 
two  systems: 


30 


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82 

HOW   MUCH   ON   THE   DOLLAR? 

In  the  following  Table  (B)  the  total  profit  on  the  dollar  contained  in 
Table  (A)  is  divided  by  the  period  of  maturity  and  reduced  to  the  total 
profit  on  the  dollar  in  one  year.  This  will  give  us  a  unit  of  value  which 
will  clearly  set  forth  the  relative  gains  promised  by  the  different  associa- 
tions enumerated.     The  progressive  arrangement  would  then  be  as  follows: 

TABLE  B. 


Name  of  Organization. 


Profit  on  One 
Dollar  Reduced 
to  One  Year. 


Mutual  Endowment,  Oakland 

Self-Endowment,  San  Francisco 

Home  Mutual  Endowment,  San  Francisco 

Golden  Gate  Endowment,  San  Francisco. 

Golden  Shore  Endowment,  San  Francisco 

Royal  Argosy  Endowment,  San  Francisco 

Legion  of  the  West  Endowment,  San  Francisco 
Star  of  the  West  Endowment,  San  Francisco  -.. 
United  Endowment  Associates,  San  Francisco.. 

Fraternal  Guild  Endowment,  San  Francisco 

Guaranty  Endowment,  San  Francisco 

Eureka  Endowment,  San  Francisco 

Pacific  Endowment,  San  Francisco 

Safety  Endowment,  San  Francisco 

Beacon  Light  Endowment,  San  Francisco 

Bankers'  Endowment,  San  Francisco 

National  Endowment,  San  Francisco 


$0  28 
36 
58 
71 
74 


88 
92 
94 
1  00 
1  11 
1  15 
1  32 
1  85 
3  33 


DISPARITY   IN   CONTRACTS. 

If  we  had  no  other  criterion  to  go  by,  the  remarkable  disparity  in  the 
financial  programmes  of  these  endowment  concerns  should  be  in  itself  suf- 
ficient to  create  distrust.  Take  any  line  of  business — commercial,  finan- 
cial, old  line  insurance,  etc. — and  inquire  if  such  differences  exist  in  the 
quotations  of  rival  firms  or  corporations?  A  few  cents  or  a  small  fraction 
of  a  dollar  is  generally  the  rule.  Among  the  endowments,  one  man  joins 
the  Mutual  of  Oakland,  and  pays  in  assessments  for  eight  years  at  $2  32^ 
per  month,  or  $223  20,  and  receives  $500  for  his  first  coupon.  If  he  had 
joined  the  National,  and  paid  in  $2  50  per  month  for  the  same  time,  or 
$240,  he  would  be  entitled  to  receive  $800.  A  difference  in  assessments  of 
only  $16  80,  but  a  difference  in  amount  of  coupons  cashed  of  $300. 

The  Mutual  Endowment  of  Oakland,  according  to  the  foregoing  table, 
holds  out  the  lowest  inducements  of  profit  among  the  endowment  schemes. 
Only  124  per  cent,  after  the  lapse  of  eight  years,  on  the  total  amount. paid 
in  for  assessments — $2  24  for  every  dollar  paid  in,  or  28  cents  per  annum. 
The  Pacific  promises  to  give  twice  as  much  as  the  Mutual  in  about  half 
the  time,  which  is  equivalent  to  giving  four  times  the  value  for  money  paid 
into  its  treasury.  It  will  give  $1  11  for  every  28  cents  given  by  the  Mutual. 
If  any  dependence  were  to  be  placed  in  the  promises  of  these  endowment 
concerns,  it  is  plain  that  an  investor  would  select  the  one  which  promises 
the  most.  Who  would  go  to  Oakland  to  invest  his  money  when  he  could 
do  four  times  as  well  in  San  Francisco?  Who  would  wait  eight  years  to 
realize  110  per  cent  upon  an  investment  in  the  Mutual,  when  he  could  get 
233  per  cent  in  one  3^ear  in  the  National? 


33 

COMPARISONS    BETWEEN   ENDOWMENTS   AND    SAVINGS   BANKS. 

When  a  person  reads  of  profits  running  from  61  to  455  per  cent,  how 
insignificant  must  appear  the  4^  or  4^  per  cent  per  annum  allowed  by 
tlie  savings  banks. 

Take  for  example  the  Pacific  Endowment,  whose  average  maturity  of 
coupon  is  four  years  and  one  month  and  the  average  assessment  $2  25. 
For  the  payment  of  $110  25  a  member  receives  $500.  How  much  would 
he  get  instead  if  he  had  deposited  the  same  amount  monthly  in  a  savings 
bank  in  San  Francisco  ? 

.Suppose  he  would  receive  5  per  cent  per  annum,  which  is  higher  than  cur- 
rent rates.  For  the  first  six  months  he  would  deposit  $13  50  and  receive  no 
interest.  At  the  end  of  the  year  he  would  have  $27,  and  interest  for  six  months 
on  $13  50,  or  33  cents,  making  a  total  of  $27  33.  Second  year  he  would  get 
interest  at  the  end  of  six  months  amounting  to  68  cents;  total  principal 
and  interest,  $40  83.  Continuing  the  calculation,  at  the  end  of  the  four 
years  and  one  month  the  depositor  would  be  entitled  to  draw  from  the 
savings  banks  $119  40.  A  comparison  between  the  Pacific  Endowment 
Association  and  a  savings  bank,  both  of  San  Francisco,  would  be  as  follows: 


. 

Pacific  Endow- 
meut. 

Savings  Bank. 

Deposit          ..  - ._  - 

.$110  25 
389  75 

$110  25 

Profit--.. - 

9  15 

Total --- 

$500  00 

$119  40 

An  investor,  therefore,  who  could  only  gain  $9  15  in  a  savings  bank, 
would,  by  investing  his  money  in  the  Pacific  Endowment,  gain  $389  75,  or 
more  than  forty  times  as  much. 

Is  it  not  remarkable  that  with  such  stupendous  inducements  our  savings 
banks  are  not  depleted  of  their  millions  by  breathless  depositors  ?  Sensi- 
ble people  pause  and  ask  the  questions:  How  can  an  endowment  association 
give  four  or  five  dollars  for  one,  while  a  savings  bank  can  add  only  four  or 
five  cents  to  the  same.  Where  is  the  money  to  come  from  ?  Is  it  not  the 
fact  that  these  very  endowments  actually  deposit  their  surplus  money  and 
reserve  funds  in  the  savings  banks  ?  Their  legitimate  profit  or  gain  con- 
sequently comes  from  the  small  rate  of  interest  allowed  by  the  savings 
banks,  and  yet  they  promise  their  membership  forty  or  fifty  times  this 
amount. 

AVERAGE   PROFITS   IN   ENDOWMENTS. 

The  endowments  in  San  Francisco  having  the  largest  membership  are 
the  United  Endowment  Associates,  Legion  of  the  West,  Royal  Argosy, 
Golden  Shore,  and  Fraternal  Guild,  conducted  on  the  fraternal  or  lodge 
plan,  and  the  Pacific,  Eureka,  Guaranty,  and  Safety  on  the  proprietary  or 
self-constituted,  self-perpetuating-in-office  system. 

The  average  total  gain  per  annum  on  the  dollar  in  the  fraternal  organi- 
zations is  85  cents,  and  in  the  proprietary  $1  25. 

The  average  period,  in  round  numbers,  in  which  coupons  will  mature  in 
the  former  is  four  years,  and  in  the  latter  three  years  and  six  months. 

The  length  of  time  which  it  takes  for  a  coupon  to  mature  is  of  vast 
importance  to  these  associations.     The  shorter  the  time  the  fewer  the  lapses, 

3-L 


34 

and,  consequently,  the  larger  the  number  who  will  demand  payment  of 
their  coupons. 

UPON   WHAT    SUCCESS   DEPENDS. 

The  success  of  endowment  associations  depends  upon  two  contingencies: 

1.  The  number  of  members  who  lapse  in  their  payments  and  lose  all 
they  had  paid  in. 

2.  The  number  of  new  members  added  from  day  to  day. 

In  the  event  of  one  or  both  of  these  failing  the  organization  collapses. 
As  I  remarked  in  my  report  on  the  so  called  national  building  and  loan 
associations,  the  division  of  profits  derived  from  the  lapses  of  members  is 
somewhat  analogous  to  the  division  of  loot  by  bushwhackers  after  a  raid. 
The  healthy  growth  of  the  endowments  depends,  therefore,  upon  the 
amount  of  loot  or  booty  left  behind  by  the  unfortunates  who  have  lapsed 
on  the  one  hand  and  the  amount  of  coin  in  the  pockets  of  those  coming  in 
on  the  other. 

The  organization  scrapes  into  its  treasure  box  what  is  left  by  the  fellow 
who  has  gone  out  the  back  door  with  pockets  empty,  and  joyfully  welcomes 
the  dollars  of  the  one  coming  in  the  front  door  with  pockets  full. 

LAPSES   OR   FORFEITURES. 

Loot  or  lapsed  money  is  required  to  pay  off  the  coupons  past  due,  and 
the  fresh  supply  is  necessary  to  keep  the  ball  rolling.  Where  the  period 
of  maturity  is  long  the  lapses  are  large. 

Here  is  the  great  difference  between  the  reckoning  of  lapses  as  applied 
to  insurance  and  endowment  institutions.  In  a  life  insurance  company 
the  period  is  indefinite,  in  the  endowment  it  is  definite.  A  person  in  the 
former  very  often,  after  paying  his  premium  for  years,  gets  tired  of  doing 
so  and  drops  off,  or  else,  from  some  cause,  he  is  unable  to  pay.  As  a  result 
the  entire  membership  of  an  insurance  company  changes  every  eight  or 
nine  years. 

In  an  endowment,  on  the  contrary,  a  member  having  to  pay  his  assess- 
ments for  a  definite  and,  generally,  short  period,  will  make  desperate  efforts 
to  keep  up  his  payments  until  the  maturity  of  the  first  coupon.  After  that 
he  generally  drops  out  and  thinks  himself  "  mighty  lucky." 

In  the  Safety  Endowment  of  San  Francisco,  for  instance,  a  man  becom- 
ing a  member  at  thirty-five  years  of  age  has  to  pay  assessments  for  two 
years  only,  when  his  coupon  matures.  It  is  easy  to  see  two  years  ahead, 
and  no  sensible  man  will  join  the  Safety  unless  he  feels  safe  about  his  pay- 
ments for  these  two  short  years.     Lapses,  therefore,  will  be  exceedingly  rare. 

On  the  other  hand,  take  the  Mutual  of  Oakland,  in  which  a  man  of  the 
same  age  will  have  to  continue  his  payment  of  assessments,  month  after 
month,  for  eight  years  before  he  can  get  his  coupon  cashed,  and  the  lapses 
will  be  remarkably  large. 

The  Secretary  of  the  Mutual  informs  me  that,  out  of  a  total  on  the  roll 
of  membership  of  less  than  two  thousand  three  hundred,  more  than  a 
thousand,  or  nearly  50  per  cent,  have  lapsed.  As  the  organization  has 
been  in  existence  only  five  years  it  is  likely  that  75  per  cent  of  the  mem- 
bership will  lapse  by  the  end  of  the  eight  years. 

The  probabilities  of  an  organization  like  the  Mutual  of  Oakland  fulfill- 
ing its  obligations  are  proportionately  greater  therefore  than  those  having 
a  shorter  time  in  which  their  coupons  mature.  This  is  made  clear  by  the 
fact  that  it  has  been  enabled  to  lay  by  a  large  reserve  fund. 

It  was  given  in  evidence  before  me  that  one  of  the  reasons  why  the 


35 

Occidental  Endowment  had  collapsed  was  because  those  who  had 
received  cash  for  their  coupons  did  not  continue  their  membership.  They 
but  follow  the  dictates  of  human  nature.  Most  of  those  who  become  mem- 
bers of  endowment  associations  like  the  Occidental,  do  so  as  a  matter 
of  pure  speculation,  and  if  they  are  so  fortunate  as  to  draw  a  prize,  put  it 
in  their  pocket  and  walk  off.  Having  got  four  or  five  times  the  value  of 
their  money,  they  are  not  so  foolish  as  to  contribute  to  the  same  results  for 
others  who  follow.  It  is  simply  a  game  of  grab.  Take  the  plan  of  the 
Pacific  Endowment,  as  shown  before,  for  an  illustration.  At  the  end  of 
the  first  six  years  of  its  existence,  it  would  find  itself  bankrupt,  unless  it 
had  either  trebled  the  monthly  assessments,  or  two  thirds  of  the  six  thou- 
sand members,  whose  coupons  would  fall  due,  had  lapsed  or  forfeited  their 
claims.  If  a  business  house  having  a  large  number  of  customers  could 
not  keep  itself  on  a  paying  basis  without  a  continuous  addition  to  the 
number,  what  would  be  said  of  it?  The  entire  system  rests  on  an  unsound 
basis,  for  it  is  simply  "  robbing  Peter  to  pay  Paul." 

THE   SAFETY. 

^  From  a  circular  issued  by  the  Safety  Endowment  Union,  the  following 
list. is  taken,  showing  the  amount  received  and  disbursed  to  the  members 
therein  named: 


£      Names  of  Members  Matur- 
Z^  iNG  Coupons. 


Residence. 


Date  of  Maturing. 


B? 


rt-  o 


^  § 

^9 


Holmes,  M.P 

Holmes,  Mrs.  A.  W 

Skiilicorn,  John 

Graham.  Mrs.  M.  A 

Williamson,  Mrs.  C.  A. . 
Putnam,  Mrs.  Martha .. 
Shaughnessy,  Martin . . . 

Rebut,  Arm  and 

McDonnell,  Patrick 

Bischofif,  Henry  -  

Angus,  D.  M.- 

Dawson,  John 

Dawson,  Mrs.  Rose 

Houseman, Mrs.  Louisa. 
Wickham,  Mrs.  Mary  .. 

Gordon,  Mrs.  Mary 

Trull,  F.W... 

Byars,  E.  G 

Bogle,  Mrs.  E.  A 

Meissner,  Carl 

Smith,  Peter  A 

Morrow,  John  C 

Hunt,  H.  B.... 

McKee,  J.  L 

McLaughlin,  Mrs.  M.  A.. 

Donovan,  Patrick 

MacKeever,  Mrs.  L.  B.  . 

Cassidy,  Wm 

Wiese,  K.  R 

Cass,  Mrs.  Mary  E 

Fairweather,  A.  J 

Ackerman,  Mrs.  J.  C 

Stone,  Mrs.  Jane  - 

Doran,  Richard 

Dannenfelzer,  Mrs.  A... 

Seeley,  C.  B 

Hall,  Mrs.  E.  L 


San  Francisco. 
San  Francisco. 
San  Francisco . 
San  Francisco - 
San  Francisco. 
San  Francisco. 
San  Francisco. 
San  Francisco. 

Valleio.-- 

San  Francisco. 

Vallejo 

Vallep 

Vallejo 

Vallejo 

Napa 

San  Francisco- 

Vallejo 

Napa 

San  Francisco. 
San  Francisco- 
San  Francisco. 
San  Francisco. 
San  Francisco- 
San  Francisco - 
San  Francisco. 

Vallejo 

San  P^rancisco- 
San  Francisco. 
San  Francisco. 

Vallejo 

San  Francisco. 
San  Francisco. 
San  Lorenzo  .. 
San  Francisco. 
San  Francisco 

Napa 

San  Francisco- 


July 

Aug. 

Aug. 

Aug. 

Aug. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Sept. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 

Oct. 


16,  1889 
7, 1889 
13, 1889 
25, 1889 
27, 1889 
10,  1889 
12,  1889 
12,  1889 
14,  1889 
14, 1889 
16,  1889 , 

21,  1889 
23,  1889 
23, 1889 

25,  1889 

26,  1889 

28,  1889 

29,  1889 

30,  1889 
5,  1889 

5,  1889 

6,  1889 
9,  1889  , 

12,  1889  , 
12,  1889  . 
12,  1889 . 
14, 1889 

14,  1889  . 
14, 1889  . 

15,  1889  . 

16,  1889  . 
16,  1889 . 
19,  1889  . 

19,  1889  . 

20.  1889  . 
21, 1889  . 

22,  1889 . 


$60  00 
61  60 
66  50 
70  00 
66  50 
76  00 
60  90 
76  00 
76  00 
76  00 
76  00 
66  50 

66  50 
76  00 
80  00 
70  40 
76  00 
80  00 
70  40 
56  00 
85  50 
90  00 

67  50 
63  00 
90  00 
67  50 
79  20 
85  50 
85  50 
72  00 
90  00 
85  50 
85  50 
90  00 
67  50 
79  20 
85  50 


19 

6 

48 

72 

70 

92 

42 

63 

79 

112 

123 

99 

105 

130 

158 

64 

129 

180 

71 

8 

189 

191 

30 

1 

215 

28 

134 

172 

225 

46 

234 

229 

209 

245 

41 

208 

224 


$250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 
250 


36 


Names  of  Members  Matxjk- 
iNG  Coupons. 


Besidence. 


Date  of  Maturing. 


S2. 


S"p  a, 


^9 


Tobey,  N.G 

Conklin,  Mrs.  Jane. 

Philips,  T.K 

McClure,  Wni 

Graves,  W.  H.  H.... 

Earl,  Mrs.  F.  N 

Wiese,  G.  H 

Gerbes,  Mrs.  R 

Wescott,  Mrs.  E.  S.. 


San  Francisco. 
San  Francisco. 
San  Francisco. 
San  Francisco. 

Oakland 

Napa 

San  Francisco. 
San  Francisco. 
Rocklin 


Oct. 
Oct. 
Oct. 
Oct. 
Oct. 
Oct. 
Oct. 
Oct. 
Oct. 


23,1889.. 
24,1889.. 
26,  1889 .  - 
27,1889.- 
28,  1889  . . 

28,  1889  .  . 

29,  1889  . . 
30,1889.. 
31,1889.. 


$85  50 
79  20 
63  00 
90  00 
62  10 
79  20 
85  50 
85  50 
90  00 


Totals 


$3,496  20 


257 
119 
14 
259 
4 
183 
242 
243 
274 


$250 
250 
250 
250 
250 
250 
250 
250 
250 

$11,500 


From  the  foregoing  list,  it  can  be  seen  that  $11,500  was  disbursed  to 
members  from  whom  only  $3,496  20  was  received,  or  nearly  $3  33^  was 
paid  for  $1  received.  The  Safety  was  organized  June  28,  1888,  and 
was  therefore  nearly  one  year  and  four  months  in  existence  on  the  last 
listed  date.  Two  hundred  per  cent  per  annum  on  an  investment  is  not 
bad,  at  a  time  when  capital  is  ready  to  grasp  at  anything  that  will  return 
from  five  to  ten. 

HOW   CAN   THE    SCHEME   BE   WORKED? 

But  here  the  query  comes  in,  how  can  this  be  done,  and  how  can  it  con- 
tinue to  he  done?  A  person  can  easily  understand  how,  as  long  as  cash 
comes  pouring  in  for  new  certificates  of  membership,  the  problem  can  be 
worked  satisfactorily  for  the  managers,  but  like  the  Occidental  and  the 
numerous  other  defunct  endowments  in  the  long  mortuary  list  already 
given,  the  inevitable  collapse  is  sure  to  come,  leaving  countless  mourners 
behind. 

The  stereotyped  reply  given  to  all  this  is  that  people  go  into  these 
schemes  with  their  eyes  open,  and  if  they  suffer  they  must  stand  the  con- 
sequences. The  speculator  knows,  it  is  said,  what  risks  he  takes,  and  can- 
not "  squeal "  if  he  should  be  pinched.  All  of  this  will  equally  apply  to 
the  people  who  invest  in  lottery  tickets,  and  yet  the  law  steps  in  and  says 
that  these  tickets  shall  not  be  peddled  or  sold  in  California.  Any  one 
caught  violating  the  law  is  punished.  If  it  is  right  to  protect  the  public 
from  loss  by  speculation  in  the  one  case,  why  not  in  the  other  ?  The  deal- 
ers in  Louisiana  lottery  tickets  must  pursue  their  illegal  calling  in  hidden 
paths,  but  the  theorists,  in  endowment  schemes  which  promise  three  or 
four  dollars  for  one,  defend  the  feasibility  of  such  schemes  in  the  public 
press,  and  hold  up  their  heads  on  a  level  with  the  legitimate  business  men 
of  the  community. 

THE  PROPRIETARY  AND  FRATERNAL  COMPARED. 


Here  lies  the  remarkable  point  of  difference  between  the  proprietary  and 
fraternal  methods  of  endowment  associations.  The  United  Endowment 
Associates,  the  Royal  Argosy,  and  the  Legion  of  the  West  promptly  filled 
out  the  blank  forms  sent  from  this  office.  Free  access  to  their  books  and 
papers  was  cheerfully  granted.  Scrutiny  of  their  affairs  was  not  needed, 
as  they  publish,  in  full  detail,  at  least  annually,  the  receipts  and  disburse- 
ments of  all  moneys,  no  matter  what  the  fund  to  which  they  belong. 


37 

The  intimate  knowledge  of  the  financial  condition  and  operations  of  the 
organization  begets  confidence  on  the  part  of  the  membership  and  gives  it 
strength  to  surmount  difficulties. 

THE   UNITED   ENDOWMENT   ASSOCIATES. 

The  United  Endowment  Associates  was  organized  at  Napa  City,  Califor- 
nia, August  23,  1884.  It  has  over  sixty  lodges,  a  few  of  which  are  outside 
the  State,  embracing  a  membership  of  more  than  five  thousand.  Up  to 
the  last  day  of  August,  1889,  it  had  paid  out  on  matured  coupons  $152,875, 
out  of  a  total  of  disbursements  amounting  to  $165,500.  It  admits  to  mem- 
bership white  persons  of  both  sexes  between  the  ages  of  eighteen  and  fifty. 
It  pays  endowments  during  life  of  members  of  one  eighth  of  one  of  five 
classes  of  certificates,  from  $1,000  to  $5,000  inclusive,  in  one  eighth  of  life 
expectancy  (from  age  at  time  of  joining  to  seventy-five  years  old),  and  in 
case  of  death  only  the  next  coupon  due  thereafter  immediately,  collected 
by  assessment  of  graded  rates  according  to  the  age  at  the  time  of  joining 
on  the  membership  of  the  entire  Order.  The  endowment  fund  is  con- 
trolled by  the  Grand  Lodge. 

Up  to  and  including  October  1,  1889,  thirty-one  assessments,  averaging 
$2  40,  were  levied,  which  is  an  average  of  six  assessments  a  year  for  the 
five  years  and  one  month  it  has  been  in  existence.  There  were  levied  one 
assessment  in  1885,  four  in  1886,  eight  in  1887,  nine  in  1888,  and  nine  up 
to  October  in  1889. 

The  following  table  shows  the  membership,  etc.,  from  the  date  of  organ- 
ization : 


Tear. 

No.  of 
Members. 

No.  of 
Assess- 
ments. 

No.  of 
Deaths. 

Amount 

Paid  on 

Deaths  in 

Full. 

No.  of 
Coupons 
Matured 
and  Paid. 

Amount  Paid 

on  Coupons 

Matured  in 

Full. 

Total 
Disburse- 
ments. 

Aug.  23  to- 
Deo   31   1884 

200 

456 

842 

2,269 

4,360 

5,030 

1 

1. 
4 
8 
9 

7 

Dec  31  1885 

2 

6 

5 

23 

21 

$1,000  00 

3,125  00 

3,000  00 

13,625  00 

11.875  00 

$1,000  00 

Dec  31  188G 

3,125  00 

Dec.  31,  1887- - 
Dec.  31,  1888.. 
Aug.  31, 1889.- 

44 

83 

103 

$24,875  00 
48,875  00 
59,125  00 

27,875  00 
62,500  00 
71,000  00 

Totals 

5,030 

30 

57 

$32,625  00 

230 

$132,875  00 

$165,500  00 

From  the  report  of  the  Secretary  it  appears  that  one  hundred  and  sev- 
enty coupons,  amounting  to  $104,125,  will  have  matured  during  the  year 
1889.  For  the  year  following  (1890),  the  coupons  maturing  will  amount 
to  $228,500.  Unless,  therefore,  the  membership  should  largely  increase, 
the  number  of  assessments  to  be  levied  will  be  about  double  in  1890  what 
they  were  in  1889.  There  is  no  reserve  fund  to  draw  upon,  unless  the  sum 
received  from  one  assessment  can  be  so  considered.  The  success  of  an 
organization  of  this  character  depends  upon  a  continued  increase  in  the 
membership.  New  blood  is  absolutely  required  to  stand  the  strain  of 
increasing  assessments.  The  increase  for  the  first  few  years  of  the  United 
Associates  was  remarkably  good.  For  the  year  1889,  while  not  up  to  the 
mark  of  former  years,  it  was  still  large.  The  number,  however,  must  not 
lag,  but  keep  on  increasing,  or  assessments  must  be  increased. 

In  order  to  pay  $228,500  for  maturing  coupons  in  1891,  there  will  be 


38 

required   ninety-five  thousand  two  hundred  and  eight  individual  assess- 
ments, at  the  average  of  $2  40  each. 

If  the  membership  increased  so  as  to  average  six  thousand  in  1891,  it 
will  require  about  sixteen  assessments  to  meet  the  liabilities  on  account  of 
coupons  maturing. 

THE   LEGION   OF   THE   WEST. 

Next  to  the  United  Endowment  Associates  comes  the  Legion  of  the 
AVest,  which  was  incorporated  September  8, 1885.  According  to  the  report 
of  the  Secretary  for  1889  it  had  twenty-nine  lodges,  and  a  membership  of 
two  thousand  four  hundred  and  twenty-seven,  on  July  1,  1889.  The  plan 
of  this  organization  is  outlined  in  its  prospectus  as  follows: 

The  Grand  Lodge  is  composed  of  its  officers,  duly  elected,  standing  committees,  and 
representatives  from  subordinate  lodges,  and  holds  annual  sessions.  From  this  body- 
emanate  all  laws  for  the  government  of  the  Order,  and  subject  to  the  laws,  it  controls  the 
funds. 

Subordinate  lodges  act  as  custodians  of  the  special  benefit  and  beneficiary  moneys  until 
called  by  the  officers  of  the  Grand  Lodge;  they  have  charge  of  the  administration  of  their 
local  affairs,  with  power  to  accept  or  reject  those  who  may  apply  for  membership. 

TWO  DISTINCT  CLASSES  OF  MEMBERS. 

First — A.  Special  benefit  members  of  first  series,  contributing  to  the  special  benefit 
fund  and  holding  certificates,  with  coupons  attached,  payable  to  the  member  at  stated 
periods  during  life,  and  in  case  of  death,  one  coupon  being  payable  to  the  member's 
nominee. 

B.  Special  benefit  members  of  second  series,  contributing  to  the  special  benefit  fund, 
and  holding  certificates  with  ten  coupons  attached,  payable  as  they  mature,  to  the  mem- 
ber if  living,  or  if  dead,  to  his  nominee. 

(Several  special  benefit  certificates  will  be  issued  to  a  member,  as  hereinafter  stated.) 

Second — Beneficiary  members,  contributing  to  the  beneficiary  fund,  and  holding  benefici- 
ary certificates,  payable  only  at  death  to  nominees  to  be  named. 

Membership  in  the  special  benefit  class  does  not  affect  membership  in  the  beneficiary 
class,  nor  can  the  funds  of  either  of  said  two  classes  be  used  for  the  payment  of  claims 
against  the  other. 

Special  benefit  certificates  of  the  first  series  are  divided  into  six  classes,  viz.:  Class  1, 
$1,000;  Class  2,  |2,000;  Class  3,  $3,000;  Class  4,  $4,000;  Class  5,  $5,000;  Class  6,  $6,000.  Ten 
coupons  being  attached  to  each  certificate,  except  to  persons  over  fifty  years  of  age,  when 
coupons  will  be  attached  as  follows : 

Age  51 8  coupons. 

Age  52 -.8  coupons. 

Age  53 - 7  coupons. 

Age  54. 6  coupons. 

Certificates  of  this  series  will  be  issued  to  members  of  sound  bodily  health,  between  the 
ages  of  fifteen  and  fifty-five  years. 

For  the  fiscal  year  ending  July  31, 1889,  there  were  $52,126  30  collected 
in  assessments,  r$47,608  12  of  which  was  apportioned  to  pay  maturing 
endowment  coupons,  and  $1,911  84  for  death  claims.  The  remainder, 
$2,606  28,  went  to  the  general  or  expense  account. 

There  were  six  endowment  assessments  levied  during  the  year,  averag- 
ing $3  92  each,  or  $23  52  for  the  year.  There  were  balances  on  hand  in 
the  three  funds  of  the  Legion  as  follows: 

Beneficiary  fund $180  22 

Endowment  fund 49,055  46 

Expense  fund 2,086  14 

Total $51,921  82 

For  the  year  ending  July  31, 1889,  there  was  paid  a  total  for  death  bene- 
fits of  $12,221  13  out  of  the  two  funds  called  beneficiary  and  special 
benefit. 

No  coupons  had  matured  during  the  said  fiscal  year.    The  Secretary,  in 


his  report,  shows  that  by  the  end  of  next  year — 1890 — coupons  will  have 
matured  amounting  to  $193,483  33. 

The  number  of  assessments  to  be  levied  has  been  increased  from  six 
during  the  past  fiscal  year  to  ten  for  the  present.  Next  year  the  number 
will  be  still  further  increased,  and  they  will  have  to  keep  on  increasing 
year  after  year  under  its  present  system. 

THE    ROYAL    ARGOSY. 

The  Royal  Argosy  was  organized  in  San  Francisco,  May  23,  1888,  and 
on  October  1,  1889,  had  thirty-five  lodges,  with  a  membership  of  two 
thousand  one  hundred.     It  is  not  incorporated. 

The  plans  and  purposes  of  the  Royal  Argosy  are  as  follows: 

1.  To  unite  fraternally  all  white  persons  of  good  moral  character,  who  are  socially 
acceptable,  and,  if  for  beneficial  membership,  of  sound  bodily  health,  between  the  ages  of 
fifteen  and  sixty-five  years. 

2.  To  establish  a  Protection  Degree  (Class  A)  Fund,  from  which,  on  the  satisfactory 
evidence  of  the  death  of  a  beneficial  member  of  the  Order  of  the  Protection  Degree,  who 
has  complied  with  all  its  lawful  requirements,  a  sum  not  exceeding  $5,000  shall  be  paid  to 
the  family,  orphans*  dependents,  or  other  beneficiaries,  as  the  member  may  direct;  and 
the  further  sum  of  an  amount  not  exceeding  $250  (on  account  of  the  certificate  held  by 
the  member)  to  each  of  the  two  members  holding  valid  certificates  numbered  anterior 
and  subsequent  to  the  certificate  of  the  member  deceased. 

3.  To  establish  an  Aid  Degree  (Class  B)  Fund  for  the  payment  of  an  aid  certificate,  with 
ten  coupons  attached,  and  no  coupon  to  exceed  in  amount  the  sum  of  $700  (said  coupons 
being  payable  at  stated  periods,  the  amount  of  the  next  maturing  coupon  only  being 
payable  in  case  of  the  death  of  the  member)  to  the  family,  orphans,  dependents,  or  other 
beneficiaries,  as  the  members  may  direct. 

4.  To  establish  a  Relief  Degree  (Class  C)  Fund,  from  which,  on  the  satisfactory  evidence 
of  the  sickness  of  a  beneficial  member  of  the  Relief  Degree,  a  sum  not  exceeding  $20  per 
week  shall  be  paid  to  such  member  for  a  period  of  twenty-six  weeks. 

5.  To  establish  a  Reserve  Fund  for  the  benefit  of  such  members  of  the  Order  in  good 
standing  of  the  different  degrees  who  have  been  contributing  members  tliereof  for  not 
less  than  five  years,  thereby  limiting  the  extent  of  their  liabilities  and  the  number  of 
assessments  to  be  paid  per  annum. 

6.  To  educate  its  members  socially,  morally,  and  intellectually. 

7.  To  extend  all  moral  and  material  aid  in  its  power  to  members  and  to  those  dependent 
on  them. 

FORMATION   OF   THE  ORDER. 

The  Supreme  Lodge  is  the  supreme  head  of  the  Order,  and  is  composed  of  its  organizers 
and  associates,  officers,  and  representatives  from  Grand  Lodges.  Its  regular  meetings  are 
held  annually,  and  special  sessions  maybe  called  by  the  Supreme  President  at  the  request 
of  five  or  more  members. 

Grand  Lodges  are  composed  of  representatives  from  each  subordinate  lodge  in  the 
State,  and  are  governed  by  such  officers  and  committees  as  they  may  annually  elect. 
Subordinate  lodges  are  placed  within  their  control  and  supervision,  subject  to  the  laws  of 
the  Supreme  Lodge. 

Subordinate  lodges  are  composed  of  Protection,  Aid,  and  Relief  Degree  or  beneficial, 
non-beneficial,  and  honorary  members  of  good  social  and  moral  standing,  who  are 
admitted  upon  petition  by  ballot.  All  petitioners  for  beneficial  membership  must  be  of 
sound  bodily  health,  and  between  the  ages  of  fifteen  and  sixty-five  years.  Non-beneficial 
members  are  persons  acceptable  to  every  member  of  the  lodge,  but  ineligible  to  beneficiary 
membership  on  account  of  age,  unsound  health,  or  other  causes,  or  who  may  desire  to 
enter  the  Order  as  such;  they  pay  no  assessments,  and  are  not  entitled  to  any  moneyed 
benefits  from  the  Order.  Honorary  members  may  be  elected  unanimously  bj'  one  lodge 
from  members  of  another  lodge  as  a  mark  of  esteem  and  respect  for  special  services  ren- 
dered to  a  lodge  or  to  the  Order  at  large. 

DUES   AND   BENEFITS. 

Each  member  pays  as  quarterly  dues  such  an  amount  as  may  be  agreed  upon  by  the 
lodge,  but  cannot  be  less  than  50  cents  per  quarter. 

EXPENSES   OF   GOVERNMENT. 

Each  subordinate  lodge  pays  a  per  capita  tax  of  10  cents  per  month  per  member  (for 
the  time  they  are  members)  to  the  Supreme  Lodges ;  Grand  Lodges  receive  80  per  cent  of 
the  per  capita  tax  collected  from  lodges  within  their  jurisdiction.  From  the  amount 
received,  the  mileage  of  representatives,  salaries,  expenses  of  annual  sessions,  and  inci- 
dentals are  paid. 


40 


SALARIED    OFFICERS. 


Salaries  are  paid  to  those  of  the  supreme  officers  who  perform  the  work  necessary  for 
the  Order,  and  the  amount  is  determined  by  the  Supreme  Lodge  in  session. 

FUNDS  AND  THEIR  SECURITY. 

All  moneys  are  received  by  Supreme  Accountant.  All  officers  of  the  Order  who  have 
charge  of  any  of  its  funds  are  required  to  give  sufficient  bonds  for  the  faithful  discharge 
of  their  duties.  These  bonds  may  be  increased,  from  time  to  time,  as  the  numerical 
strength  of  the  Order  increases. 

The  total  income  from  assessments  up  to  October  1,  1889,  amounted  to 
$22,653  24.  There  was  paid  for  death  claims,  Class  B,  $3,500.  The  Royal 
Argosy  has  over  $20,000  of  a  reserve  fund. 

ENDOWMENTS   ON   TRIAL. 

It  is  the  practice,  whenever  any  attempt  is  made  to  prove  the  infeasibility 
of  their  plans,  for  the  officers  of  endowment  associations  to  point  to  the 
long  continued  success  of  the  Ancient  Order  of  United  Workmen,  Knights 
of  Honor,  Chosen  Friends,  and  others. 

There  is  a  deep  line  of  demarkation  between  the  two  classes.  Both  in 
one  respect  are  alike — that  is,  in  insuring  their  members  and  paying  the 
policy  on  the  assessment  plan — but  the  endowments  propose  to  pay  it  in 
installments  to  the  living  members,  while  the  Workmen,  Knights  of  Honor, 
etc.,  only  do  so  to  the  legatee  after  death. 

The  supporters  of  the  endowment  mutual  assessment  system  then,  in 
order  to  inspire  confidence,  must  be  able  to  point  to  the  examples  of  an 
association  conducted  upon  their  plan  which  has  been  attended  with  suc- 
cess for  a  period  long  enough  to  give  fair  assurance  of  stability.  This  they 
are  as  yet  unable  to  do.  The  United  Endowment  Associates  stands  beyond 
question  at  the  head  of  the  mutual  or  assessment  endowment  associations 
in  California.  It  has  been  in  successful  operation  for  more  than  five  years. 
It  has  a  large  membership;  has  paid  a  large  sum  for  coupons;  has  been 
economically  managed,  and  has  the  advantage  of  having  at  its  helm  capable 
and  energetic  officers.  The  United  Endowment  has  then  all  the  elements  of 
success,  if  success  is  possible. 

The  association  is  on  its  trial,  for  as  none  of  the  mutual  endowments  are 
six  years  old,  it  is  but  an  experiment  so  far.  It  would  indeed  be  astonish- 
ing if  it  could  succeed  in  continuing  to  pay  88  cents  on  the  dollar  per  year, 
whilst  the  Mutual  Endowment  of  Oakland,  conducted  on  the  company 
plan,  can  afford  to  pay  only  28  cents. 

The  endowment  feature  of  insurance  of  itself  is  not  new.  It  has  been 
in  operation  for  many  years  by  old  insurance  companies,  but  as  was  dem- 
onstrated by  Mr.  Bacon  in  his  testimony,  there  is  a  wide  divergence  between 
the  old  and  the  new  methods. 

THE   OLD    LINE    SYSTEM   OF   ENDOWMENT. 

In  the  old  line  insurance  companies  the  endowment  plan  may  be  con- 
sidered limited  payment  life  policies,  which  provide  for  the  payment  of 
definite  cash  surrender  values  at  the  end  of  certain  periods  defined.  The 
plan  usually  embraces  the  payment  of  the  full  amount  of  the  face  of  the 
policy  to  the  heirs  or  legatee  of  the  insured  in  case  of  death,  at  any  time,, 
from  the  day  the  policy  was  issued.  Take  the  rates  of  five  of  them,  by  way 
of  example,  for  an  endowment  policy  for  $1,000,  payable  in  ten  years,  or  in 
the  event  of  death,  to  an  insurer  thirty-five  years  of  age: 


41 

Northwestern  of  Milwaukee $102  51  annual  premium. 

Manhattan  of  New  York... — $105  53  annual  premium. 

Washington  of  New  York... $105  53  annual  premium. 

Pacific  of  California $105  53  annual  premium. 

Equitable  of  New  York $105  53  annual  premium. 

In  contrasting  these  rates  with  those  charged  by  our  "  cooperative  "  local 
endowments,  the  first  thing  to  strike  the  reader  will  be  the  remarkable 
uniformity  in  the  amount  of  the  annual  payments  charged  by  the  regular 
or  old  line  companies.  In  our  San  Francisco  born  endowment  institutions, 
as  described,  the  rates  have  been  fixed  and  plans  adopted  in  a  helter- 
skelter,  razzle-dazzle  style. 

The  projectors  would  appear  to  have  entered  upon  a  "go-as-you-please  " 
race  for  public  patronage. 

The  next  point  of  distinction  between  the  old  and  the  new  is  in  the 
amount  of  money  to  be  paid  for  the  endowment.  The  assessments  charged 
by  our  new  style  locals  are  a  mere  bagatelle  compared  to  the  old  rates. 
Instead  of  a  man  getting  four  or  five  dollars  for  one  at  the  end  of  three  or 
four  years,  he  actually  has  paid  in  more  than  he  receives  when  his  endow- 
ment matures  in  the  old  companies.  For  instance,  in  the  case  of  four  out 
of  five  of  the  examples  before  given,  he  will  have  paid  in  to  the  company 
$1,055  30  when  the  time  arrives  when  he  is  to  receive  $1,000  in  return. 
Of  course  it  should  be  borne  in  mind  that  during  all  that  period  his  life 
was  insured  for  $1,000. 

WHY    SHOULD   NOT   THE   NEW    SYSTEM    SUCCEED. 

But  apart  from  these  discrepancies — glaring  and  significant  as  they  are — 
there  is  nothing  which  can  be  successfully  done  under  proprietary  or  com- 
pany management,  which  should  not  be  accomplished  with  at  least  as  good 
results  and  at  less  expense  by  cooperators.  This  fact  has  been  demon- 
strated by  the  wonderful  success  attending  the  experiment  of  insuring  the 
lives  of  their  members  by  fraternal  societies  or  orders,  whose  membership 
now  runs  up  to  the  hundreds  of  thousands.  If  successful  in  insurance  on 
the  entire  life,  why  not  in  stated  peHods  or  divisions  of  life,  is  a  question 
which  may  reasonably  be  asked. 

If  cooperators  have  not  only  held  their  ground  but  got  the  best  of  the  old 
system  in  the  one  case,  why  not  in  the  other?  If,  then,  a  genuine  cooper- 
ative organization  finds  that  its  plans  are  not  feasible,  or  that  it  promises 
more  than  it  can  fulfill,  it  rests  with  itself  to  alter  said  plans  so  as  to  bring 
them  within  the  range  of  practicability. 

In  such  an  organization  all  members  stand  precisely  upon  the  same 
level,  with  an  equal  voice  and  vote  in  its  affairs. 

There  are  no  perpetual  or  life  term  officials.  High  salaries  and  other 
extravagances  are  not  tolerated.  Their  annual  meetings  and  election  of 
officers  are  not  shams.  Whether  they  gain  or  lose,  sink  or  swim,  is  their 
own  affair.  The  great  difficulty  is  to  discriminate  between  the  genuine 
and  the  counterfeit  cooperative.  Not  every  one  that  has  supreme,  grand, 
and  subordinate  lodges,  with  the  usual  staff  of  supreme  and  grand  officers, 
is  a  genuine  fraternal  organization.  "Not  every  one  that  says  'Lord !  Lord?' 
shall  enter  into  the  Kingdom  of  Heaven."  In  some  of  the  so  called  "orders" 
it  will  be  found  that  the  supreme  lodge  is  in  the  hands  of  a  self-constituted, 
self-perpetuating  coterie,  who  were  the  prime  movers  in  organizing  the 
order  and  who  manage  its  affairs  to  suit  themselves.  You  will  generally 
find  in  the  constitution  of  the  "order"  some  section  or  clause  by  means  of 
which  these  people  can  hold  on  to  power.     They  fill  the  offices  and  control 


42 

the  finances.  Their  coupons  are  among  the  first  to  mature,  and  their  friends 
are  the  first  to  be  taken  care  of.  The  true  ring  can  be  best  ascertained  by 
studying  their  laws,  and  from  the  proceedings  at  the  annual  meetings  and 
the  results  shown  in  the  reports  of  the  various  officers.  The  law  of  the 
State  should  define  what  constitutes  a  "  cooperative  fraternal  or  benevolent 
association,"  and  put  it  in  the  power  of  the  State  Insurance  Commissioner 
to  suppress  any  not  coming  up  to  the  standard. 

In  a  genuine  cooperative  endowment,  where  the  members  frequently 
meet  to  discuss  ways  and  means  for  the  good  of  the  Order,  social  attach- 
ments are  formed  which  a  member  will  desire  to  maintain  regardless  of 
pecuniary  considerations.  Hence  it  follows  that  members  in  them  do  not, 
to  the  same  extent  as  in  the  proprietary  organizations,  drop  off"  after  receiv- 
ing cash  for  the  first  coupon.  They  take  a  personal  interest  in  the  success 
of  the  league,  and  contribute,  at  least  for  a  time,  their  share  that  the  men 
and  women  of  their  lodge  whom  they  meet  night  after  night  may  be  as 
successful  as  themselves. 

A  simple  arithmetical  demonstration  of  the  non-feasibility  of  their  plans 
is  of  itself  not  conclusive  evidence  that  an  endowment  cooperative  associa- 
tion will  collapse  when  it  has  within  itself  such  elements  of  recuperation. 
While  all  fair  minded  citizens  must  condemn  the  false  pretensions  and 
dubious  methods  of  the  proprietary  endowment  companies  organized  for 
the  special  benefit  of  a  few  individuals,  it  is  but  right  and  proper  to  give 
the  genuine  cooperative  endowment  associations  a  fair  trial  before  pro- 
nouncing condemnation.  At  the  same  time,  sham  fraternals  should  be 
mercilessly  stamped  out  of  existence.  They  are  a  reproach  and  a  menace 
to  the  genuine  organizations. 

CONCLUSION. 

In  conclusion  I  desire  to  express  my  sincere  conviction,  based  upon  the 
developments  of  this  investigation,  that  the  cooperative  feature  of  endow- 
ment insurance  is  antagonistic  to  the  true  idea  of  what  cooperation  means 
to  accomplish. 

Sterling  cooperation  is  an  incentive  to  thrift,  teaching  that  the  bettering 
of  one's  condition  must  be  brought  about  by  economy,  and  that  w^hat  tends 
to  saving  is  a  recognized  blessing.  The  endowment  schemes,  on  the  con- 
trary, as  here  conducted,  hold  out  the  idea  that  the  prizes,  in  the  lottery 
of  life,  are  more  inviting  than  the  few  cents  on  the  dollar  of  cooperative 
saving. 

Thrift  is  subordinated  to  luck,  and  the  wage  earner  is  invited  to  throw 
his  hard  earned  dollars  into  the  endowment  wheel  of  fortune,  upon  the 
chance  of  drawing  a  prize.  Their  motto  is  to  make  and  not  to  save  money — 
to  reach  fortune  by  a  "  Royal "  road,  instead  of  by  the  old  "  Industry  and 
Thrift"  highway. 

In  another  way  endowment  insurance  is  repulsive  to  the  proper  concep- 
tion of  cooperation.  Cooperation  means  mutuality — common  support, 
working  together  for  the  common  good.  It  teaches  that  what  is  good  for 
the  individual  is  for  the  good  of  all,  and  what  works  to  the  injury  of  the 
one  is  an  injury  to  the  whole  body. 

Success  in  the  endowment  insurance  depends  to  a  great  extent  upon  the 
lapsed  or  forfeited  payments  of  members.  The  gain  to  some  is  therefore 
taken  from  the  pockets  of  others,  and  it  is  the  experience  in  such  schemes 
that  the  small  few  are  the  gainers,  while  the  great  many  are  the  losers. 
The  man  who  falls  by  the  wayside  in  the  endowment  associations,  instead 
of  being  helped  to  his  feet  by  his  brother  cooperators,  has  his  pockets  rifled 
of  what  little  he  had  paid  into  the  common  fund.     A  member  can  realize 


43 

profits  only  at  the  expense  of  his  friends  and  neighbors  in  the  same  asso- 
ciation. 

^^  Endowment  associations,  therefore,  in  every  form — proprietary,  fraternal, 
guild,  or  lodge — are  based  upon  principles  inimical  to  the  teachings  of  true 
cooperation,  and  in  their  practices  and  results  are  likely  to  work  injury  to 
the  cause. 

JOHN  J.  TOBIN, 

Commissioner. 


INQUIRY  INTO  THE  PRACTICHS  AND  PURPOSES  OF 
ENDOWMENT  ASSOCIATIONS. 


John  J.  Tobin,  Commissioner. 


Bureau  of  Labor  Statistics,  September  23, 1889. 

Mr.  Carl  Spelling  appeared  for  the  State  Labor  Bureau. 

R.  E.  Collins, 

Of  San  Jose,  a  Director  of  the  Western  Mutual  Benefit  Association,  called 
as  a  witness  and  sworn. 

Mr.  Spelling:  Were  you  one  of  the  organizers  of  the  Western  Mutual 
Benefit  Association  ?     Answer — Yes. 

Q.  Tell  who  organized  it,  and  about  what  time?  A.  I  think  that  we  got 
ready  for  business — I  could  not  name  the  date  exactly — but  I  think  it  was 
about  the  first  of  May  when  we  sent  out  the  circulars. 

Colonel  Tobin:  The  first  of  May  of  this  year?     A.  Yes. 

Mr.  Spelling:  Did  you  incorporate;  that  is,  did  the  Western  Mutual 
incorporate?    A.  We  did. 

Q.  Did  you  incorporate  previously  to  the  time  of  sending  out  the  circu- 
lars?   A.  Yes. 

Q.  How  long  previous  had  you  incorporated  ?  A.  I  could  not  tell — two 
or  three  days  or  a  week.  It  might  have  been  two  weeks.  We  were  incor- 
porated before  we  attempted  to  do  any  business.     That  was  our  position. 

Q.  Did  Mr.  Riddle  or  Mr.  Brookes  confer  with  you  in  regard  to  the 
organization  of  the  Western  Mutual?     A.  Mr.  Riddle  did. 

Q.  Did  you  not  talk  about  it  to  Mr.  Brookes,  the  President  of  the  Occi- 
dental?    A.  No,  sir. 

Colonel  Tobin:  Who  were  Riddle  and  Brookes?  A.  They  were  Presi- 
dent and  Vice-President  of  the  Occidental. 

Q.  Did  they  first  meet  and  associate  in  the  organization  of  the  Western 
Mutual?     A.  I  do  not  know  that  that  is  the  fact. 

Q.  Was  not  the  object  of  that  organization  to  continue  and  carry  out 
the  objects  of  that  association — the  Occidental — in  part?  A.  No,  sir;  it 
was  not.     That  was  in  the  matter  nothing  at  all. 

Q.  To  what  class  of  persons  did  you  send  the  first  batch  of  circulars 
sent  out?  A.  Chiefly  sent  to  Occidental  members  to  give  them  the  chance 
to  insure  in  the  new  organization,  or  reinsure  themselves,  if  they  so  desired. 

Q.  Did  you  send  circulars  to  all  the  members  of  the  Occidental,  or  to 
only  a  part?  A.  All.  They  were  sent  to  all  as  far  as  I  know.  That  was 
my  intention. 

Q.  How  do  you  know  that  they  were  sent  to  all  the  members  or  any 
members  of  the  association?  A.  Simply,  that  was  the  instruction  given, 
to  have  the  circular  sent  to  each  one  of  the  Occidental. 


46 

Q.  How  did  you  determine  who  were  members  of  the  Occidental  ?  A. 
That  I  cannot  tell;  we  had  no  way  of  knowing. 

Q.  You  sav  the  Directors  of  the  Western  Mutual  were  yourself,  A.  M. 
Pollock,  Dr.  M.  S.  Logan,  C.  Leshir,  and  F.  F.  Morelli?    A.  Yes. 

Q.  They  were  the  Directors  and  also  the  incorporators?    A.  Yes. 

Q.  Were  not  all  those  incorporators — members — certificate  holders  in 
the  Occidental  ?    A.  I  do  not  know. 

Q.  You  were?    A.  I  was. 

Q.  Was  not  Mr.  Pollock?     A.  I  never  asked  him. 

Q.  Do  you  know  where  he  is?     A.  I  do  not  know. 

Q.  Did  you  not  belong  in  this?     A.  I  did, but  I  do  not. 

Q.  Was  not  Mr.  Leshir  a  member  of  the  Occidental  ?  A.  I  could  not 
tell. 

Q.  Mr.  Morelli?     A.  Mr.  Morelli  was  a  member. 

Q.  He  is  not  President?    A.  Secretary. 

Q.  Are  you  President  ?     A.  lam. 

Q.  Mr.  Pollock  was  first  President?    A.  Yes. 

Q.  In  the  first  circular  that  you  sent  out  did  you  not  refer  expressly  to 
the  Occidental  and  its  collapse  as  the  reason  for  the  organization  of  the 
Western  Mutual?     A.  I  think  it  was  the  object. 

Q.  Then  the  object  of  incorporating  the  Western  Mutual  was  to  succeed 
the  Occidental  ?  A.  Not  to  succeed  at  all.  It  was  to  organize  a  new  organ- 
ization on  a  different  plan. 

Q.  It  was  to  be  organized  with  the  members  of  the  Occidental  as  a  basis? 
A.  Our  idea  was  to  get  material  wherever  we  could;  and  naturally  know- 
ing that  there  was  a  quantity  of  members  out  of  insurance,  we  supposed, 
of  course,  we  could  get  material  there. 

Q.  Did  you  organize  it  before  the  collapse  of  the  Occidental,  and  send 
out  your  circulars?     A.  Not  before;  after  the  collapse. 

Q.  Where  did  you  get  the  list  of  the  members?  A.  That  I  do  not  know. 
I  was  not  President. 

Q.  Did  you  not  see  the  first  list?  A.  I  never  saw  the  list  from  that  day 
to  this. 

Q.  Is  that  one  of  the  circulars  you  sent  out?  A.  That  is  one  of  the  cir- 
culars, April  fifteenth.     We  don't  deny  it. 

Colonel  Tobin:  Was  your  plan  somewhat  similar  to  the  plan  of  the 
Occidental?  A.  No,  sir;  it  was  on  the  assessment  plan;  no  comparison 
with  the  Occidental  plan. 

Q.  Did  it  not  embrace  somewhat  the  same  plan  as  the  Occidental? 
A.  No,  sir;  no  comparison. 

Q.  Did  your  plan  not  divide  into  four  different  assessments?  A.  No,  sir. 
This  plan  is  not. 

Mr.  Spelling.  Mr.  Commissioner,  I  want  to  examine  that  circular 
(April  fifteenth).     It  is  offered  in  evidence. 

Mr.  Spelling:  What  is  the  membership?     A.  I  do  not  know  that. 

Q.  Do  you  know  when  that  proposition  you  made  to  members  of  the 
Occidental  was  first  published,  that  you  sent  out?  A.  I  think  it  is 
embraced  there.  That  is  all  I  know.  There  were  several  circulars  sent; 
of  course,  I  cannot  tell  the  purport  of  them;  they  speak  for  themselves. 

Q.  Have  you  ever  attended  a  meeting  of  the  Directors  of  the  Western 
Mutual  Benefit  Association  since  it  was  organized?     A.  Yes. 

Q.  Have  you  ever  seen  the  books  purporting  to  be  lists  of  members? 
A.  I  have  seen  them  occasionally.  They  were  open  for  the  instruction  of 
members. 

Q.  You  do  not  know  about  its  business?    A.  No. 


47 

Q.  You  have  been  a  Director?     A.  Yes. 

Q.  Since  it  incorporated?  A.  Yes.  We  incorporated  in  May.  We  did 
not  have  a  room  and  have  a  meeting  till  the  first  of  May. 

Q.  You  seemed  to  be  in  a  hurry  to  send  out  your  circulars;  how  is  this? 
A.  It  is  perfectly  natural  for  any  house  doing  business  to  get  all  the  goods 
and  all  the  material  they  can. 

Colonel  Tobin:  There  is  something  in  that  circular  that  I  would  like  to 
know  about — that  is,  if  Mr.  Collins  will  acknowledge  that  is  the  tract  issued 
by  the  association?     A.  That  is  the  circular  of  the  association. 

Q.  Do  you  know  who  folded  and  mailed  them — if  done  by  Mr.  Brookes, 
the  President?     A.  I  could  not  tell  anything  about  it. 

Q.  Is  it  not  the  fact  that  this  association,  as  far  as  this  plan  is  concerned, 
has  been  considerably  enlarged  since  this  was  issued?  A.  The  plan  was 
modified  considerably;  the  plan  we  are  now  working  under  is  different 
from  the  first  circular  issued. 

Q.  Is  not  the  plan  stated  in  your  incorporation  in  your  constitution  and 
by-laws  ?    A.  It  is. 

Q.  You  say  this  plan  has  been  changed?  A.  I  think  we  changed  the 
plan — I  think  some  two  months  since;  not  the  entire  plan,  but  the  mode 
of  assessment — the  rate  of  assessment.  There  have  been  other  tables 
added,  different  somewhat,  but  all  on  the  assessment  plan. 

Q.  How  often  have  your  constitution  and  by-laws  been  changed  ?  A.  I 
don't  think  they  have  been  changed. 

Q.  You  say  the  plan  was  embraced  in  your  constitution  and  by-laws, 
and  you  say  that  it  has  been  changed.  Therefore,  there  has  been  a  change 
in  your  constitution  and  by-laws?    A.  To  conform  to  this  plan,  I  presume. 

Q.  How  many  changes  have  there  been  in  your  organization  since  estab- 
lished?   A.  I  could  not  say. 

Q.  Who  have  authority  to  alter  or  amend  the  by-laws?  A.  The  Board 
of  Directors. 

Q.  At  any  time  they  please?     A.  At  any  regular  meeting. 

Q.  When  are  their  meetings?  A.  They  are  on  the  first  Tuesday  of  each 
month. 

Q.  Have  you  had  any  general  meeting  of  the  members?     A.  No,  sir. 

Q.  Have  your  by-laws  been  printed?  A.  No,  sir;  they  have  not.  They 
are  there  in  copy  form  for  the  inspection  of  any  one,  in  business  hours,  that 
wishes  to  see  them — members,  or  all  others  interested. 

Q.  How  can  the  members  be  informed  of  a  change  in  your  by-laws  when 
they  are  not  printed?     [No  answer.] 

Q.  I  would  ask  you:  In  the  form  of  application  for  membership  and  in 
the  certificate,  is  there  not  an  obligation  on  the  part  of  members  to  comply 
with  the  laws  of  your  organization  ?    A.  Yes. 

Q.  Those  laws  have  not  been  printed?     A.  Have  not  been  printed. 

Q.  They  have  been  changed  by  the  Board  of  Directors?  A.  I  won't 
say  positively  that  they  have  been  changed.  An  addition  is  a  change,  but 
the  circular  is  not  a  part  of  the  by-laws. 

Q.  You  say  the  plan  of  organization  is  embraced  in  the  by-laws?  A. 
Yes. 

Q.  That  is  the  plan?     A.  Yes. 

Q.  The  one  referred  to  as  embraced  in  the  by-laws  ?    A.  Yes. 

Q.  You  have  changed  that  plan?     A.  Yes. 

Q.  Modified  it?    A.  Yes. 

Q.  How  can  members  be  informed  of  that  change  when  the  by-laws  are 
not  printed?    A.  That  I  cannot  answer. 


48 


Q.  And  still  you  require  members  to  pledge  themselves  to  obey  your  laws 
and  constitution?     A.  I  presume  that  is  the  idea. 

Mr.  Spelling:  I  want  to  ask  you  this  question, Mr.  Collins:  Is  it  not  the 
fact  that  the  officers  of  the  Occidental  cooperated  with  the  organizers  of 
the  Western  Mutual  Benefit  Association  in  the  organization  of  the  latter? 
A.  Not  to  my  knowledge. 

Q.  Did  not  Mr.  Riddle  send  out  circulars  as  the  business  manager  of 
the  Occidental  in  the  interest  of  the  Western  Mutual?  A.  Not  to  my 
knowledge. 

Q.  I  will  introduce  a  circular  sent  out  by  J.  L.  Riddle,  dated  May  1, 
1889.     Were  you  a  member  of  the  Western  Mutual?     A.  I  am. 

Q.  And  a  circular  sent  to  one  is  generally  sent  to  all?  A.  That  is  the 
supposition. 

Q.  Did  you  send  to  Mr.  Richard  Eaves,  of  Pomona,  California,  a  mem- 
ber of  the  Western  Mutual,  a  circular,  as  follows:  "The  Occidental 
Endowment  Association  having  suspended  business,  five  of  its  members, 
all  of  whom  are  known  to  be  good  business  men,  in  order  to  save  them- 
selves, and  all  others  who  may  wish  to  join  in  with  them,  from  loss,  and  to 
continue  the  protection  of  their  relatives  in  case  of  death,  organize  the 
Western  Mutual.  Believing  it  to  be  to  your  interest  I  have  reinsured  you 
in  this  association  for  the  sum  of  $1,000,  the  amount  you  were  protected 
in  the  Occidental,  which  policy,  together  with  the  paid  up  certificate  for 
the  amount  of  assessments  paid  to  the  Occidental,  and  the  association's 
terms  of  reinsurance,  are  herewith  sent  for  your  consideration.  The  Occi- 
dental members  are  rapidly  accepting  the  reinsurance,  and  from  present 
appearances  a  large  majority  will  soon  be  enrolled.  Hoping  you  will  real- 
ize that  I  have  done  and  am  doing  all  in  my  power  to  protect  you,  I  am 
respectfully,  J.  L.  Riddle."  On  the  back  of  that  circular  was  the  follow- 
ing indorsement:  "This  will  answer  the  question,  where  has  all  the  money 
collected  gone  to."  Then  follows  a  statement  of  the  officers  of  the  Occi- 
dental, signed  by  George  C.  Jones,  Secretary;  J.  L.  Riddle,  Vice-President 
of  late  I.  T.  E.  A.  The  proposition  referred  to  in  that  circular  of  Mr.  Rid- 
dle I  introduce  in  evidence.  Mr.  Commissioner,  you  can  examine  it,  and 
ask  the  witness  concerning  it  if  you  wish.  Here  is  a  copy  of  Mr.  Eaves' 
policy  in  the  Western  Mutual,  also;  and  I  have  another  one  here  that  I 
will  offer. 

Colonel  Tobin:  Mr.  Collins,  that  second  part  I  do  not  understand;  the 
part  marked  "  2d:  "  "  To  all  parties  in  good  health,  their  new  certificate  will 
date  from  the  date  of  the  month  of  his  or  her  coupon."  To  what  does 
that  refer?  Does  it  refer  to  persons  who  had  coupons  in  the  Occidental? 
A.  I  presume  it  does.  This  circular  was  issued  while  Pollock  was  Presi- 
dent. I  had  no  knowledge  of  the  circular  till  it  was  received.  I  was  not 
President,  and  have  no  knowledge.  I  was  not  consulted  in  the  issuing  of 
that  circular,  as  Mr.  Pollock  was  then  President.  I  was  not  President  of 
the  Board  at  that  time. 

Q.  You  say  a  paid  up  certificate  will  be  issued  for  the  amounts  of  assess- 
ment previously  paid.  Were  the  assessments  paid  to  the  Occidental?  A. 
It  reads  that  way.  Of  course  I  had  no  knowledge  of  the  issuance  of  that 
circular.     I  was  not  present  at  the  meeting  where  that  circular  was  issued. 

Mr.  Spelling  :  Mr.  Collins,  the  Commissioner  has  in  his  possession  a 
complaint  against  your  association  signed  by  General  Jo  Hamilton,  ex- 
Attorney-General  of  the  State.  It  is  a  very  good  time  to  introduce  it.  It 
is  in  regard  to  Mr.  Keener's  policy,  which  I  will  introduce  in  evidence. 

Colonel  Tobin:  It  is  Rudolph  Keener. 

Mr.  Spelling:  This  is  an  extract  from  a  letter  by  General  Jo  Hamil- 


i 


49 

ton,  Auburn,  California,  dated  August  17,  1889:  "It  seems  from  Mr. 
Keener's  explanation,  that  after  the  collapse  of  the  Occidental  Self- 
Endowment  Association,  a  new  association,  calling  itself  the  Western 
Mutual  Association,  induced  him  to  send  him  the  policy  of  the  Occidental 
Self-Endowment  Association,  promising  to  send  him  their  policy  instead. 
This  he  did,  sent  his  policy  of  one  wildcat  association  and  got  nothing 
instead."     A.  That  is  from  whom? 

Q.  The  proposition  made  to  those  members  in  the  Occidental  was  about 
this,  as  I  understand  it:  They  were  not  reinsured,  or  they  were  not 
insured  for  the  amount  that  they  carried  in  the  Occidental,  but  only  the 
amount  of  the  coupon  that  was  about  to  become  due;  was  that  it?  A.  No. 
Our  plan  calls  that  they  shall  join  the  institution  and  carry  the  same 
amount  of  insurance  in  the  Mutual  that  they  were  carrying  in  the  Occi- 
dental ;  if  they  were  carrying  a  thousand  dollars,  they  were  to  carry  a 
thousand  dollars. 

Q.  I  think  you  are  mistaken,  Mr.  Collins.     A.  That  is  the  idea. 

Q.  I  don't  think  you  understand  what  the  proposition  was.  [Circular, 
"To  all  persons  in  good  health,"  read.] 

Q.  We  will  pass  that  for  the  present.  What  position  did  you  occupy  in 
the  Occidental  while  you  were  a  member  of  it?  A.  I  was  Club  Manager 
at  San  Jose. 

Q.  How  many  members  from  first  to  last  did  the  Occidental  have  in 
San  Jose?     A.  We  had  ninety-three  or  ninety-seven. 

Q.  Were  they  as  a  general  rule  rich  people  or  poor  people?  A.  They 
were  scattered,  as  you  will  find  in  every  association. 

Mr.  Spelling:  I  want  to  ask  you  in  regard  to  Mrs.  Pender:  Do  you  know 
when  her  coupon  fell  due?  A.  I  could  not  tell  you  now;  you  have  the 
papers. 

Q.  Was  it  ever  paid?     A.  I  have  no  knowledge  of  it. 

Q.  Was  it  not  given  you  to  collect  six  months  before  the  Occidental  had 
collapsed?  A.  It  was  given  me  by  Mrs.  Pender,  because  she  could  not 
write.  I  done  her  a  favor  to  send  her  coupon  into  the  office  for  her.  That 
is  all. 

Q.  Is  it  all  the  explanation  you  have  to  offer  about  her  coupon  ?  A.  It 
was  handed  into  the  office,  and  I  am  told  is  still  on  file.  She  told  me  she 
never  got  her  money. 

Q.  Did  you  get  a  receipt?  A.  No,  sir;  I  never  asked  for  a  receipt;  I 
simply  wrote  it  in  her  presence — wrote  a  letter  and  closed  it. 

Q.  Did  she  not  go  to  you  and  demand  a  receipt?     A.  Never. 

Q.  Did  you  see  that  coupon  any  more?  A.  I  was  told  that  it  was  on 
file  in  the  central  office. 

Q.  You  made  inquiry  into  it?  A.  Most  undoubtedly  I  did.  When  I 
found  your  letter  to  me  calling  for  her  coupon,  I  wrote  at  once,  and  the 
answer  came  that  the  coupon  is  on  file,  and  has  never  been  paid. 

Q.  Did  you  not  undertake  the  collection  of  that  coupon?     A.  No,  sir. 

Q.  Did  not  Mrs.  Pender  go  to  you  long  previous  to  my  letter,  and  ask 
you  to  look  after  it,  and  account  for  it  ?  A.  No,  sir.  How  could  I  account 
for  it? 

Q.  You  were  acting  as  her  agent?  A.  I  was  not  acting  as  her, agent.  I 
•done  her  a  favor  by  writing  the  letter — as  I  wrote  for  all  others. 

Q.  Others  got  their  money,  while  she  did  not?     A.  I  don't  know. 

Q.  Did  any  get  their  money  in  that  time?     A.  Lots  of  them. 

Q.  Have  you  had  control  of  her  coupon?  A.  I  had  no  control  of  it.  It 
was  handed  to  me,  and  went  to  the  office. 

Q.  You  never  paid  any  more  attention  at  all  till  I  wrote  to  you  on  behalf 

4-L 


50 

of  Mrs.  Pender — you  never  reported  to  her  or  to  me?  A.  No;  I  don't  con- 
sider any  one  responsible  that  does  a  favor  for  a  person — she  can't  write. 
The  coupon  is  on  file,  as  I  am  told. 

Colonel  Tobin:  How  many  members  in  the  Occidental  Association  in 
San  Jose?     A.  I  think  that  the  largest  amount  was  ninety-seven. 

Q.  How  many  of  that  amount  had  coupons  paid?  A.  I  don't  know. 
The  coupons  were  not  paid  to  me.  The  money  was  sent  to  members  indi- 
vidually; I  simply  received  the  money  as  Club  Manager  and  forwarded  it 
to  the  home  office;  received  the  assessments.  Is  this  investigation  accord- 
ing to  the  subpoena  that  I  got? 

Mr.  Spelling:  It  is  into  associations  generally.  I  want  to  ask  you 
about  other  associations  in  that  town.  Were  you  the  Club  Manager  of 
any  other  associations?     A.  No,  sir. 

Q.  Do  you  know  of  any  other  associations  that  did  business  in  that 
town?     A.  I  do  not. 

Q.  Don't  you  know  the  names  of  some  other  associations  that  did 
business  more  or  less  in  San  Jose?  A.  We  have  lots  of  insurance  compa- 
nies there.     I  am  not  acquainted  only  with  my  own  affairs. 

Q.  Your  company,  then,  seemed  to  have  a  monopoly  in  San  Jose?  A. 
You  can  call  it  a  monopoly.  I  don't  know  the  affairs  or  the  doings  of 
other  TDusinesses. 

Mr.  Spelling:  I  don't  know  that  it  is  necessary  to  quote  any  of  these 
papers,  but  I  will  put  in  evidence  another  circular  issued  by  the  Western 
Mutual  and  signed  by  Morelli,  dated  May  fourth,  and  that  policy  of  Mr. 
Eads — he  puts  in  a  complaint. 

Witness:  He  says  that  he  never  received  anything  in  return? 

Mr.  Spelling:  That  was  Mr.  Rudolph  Keener,  of  Auburn. 

Witness:  It  seems  strange  that  a  gentleman  who  has  not  received  his 
policy  should  not  write  to  the  association.  He  can't  be  a  business  man. 
If  I  had  a  complaint  to  make  I  would  make  it  right  along  to  the  right 
quarter. 

Mr.  Spelling:  I  introduce  the  complaint  of  Mrs.  Eads  against  the 
AVestern  Mutual. 

Q.  Have  many  of  the  poorer  classes  of  people  been  made  victims  by 
the  collapse  of  the  Occidental?  A.  I  cannot  say  in  regard  to  that.  If 
Mr.  SpelUng  wishes  to  go  through  the  list,  I  will  give  him  the  best  expla- 
nation that  I  can.  And  then  it  might  be  my  opinion;  I  might  be  mis- 
judging the  people. 

Q.  How  many  members  in  your  new  association  ?  A.  I  am  not  able  at 
this  time  to  tell. 

Q.  You  understand  well  the  full  scope  of  the  association  at  present? 
A.  There  are  perhaps  some  things  not  fully  made  plain;  but  I  think  I 
understand  in  a  general  way  the  purpose  of  the  association. 

Q.  It  is  an  endowment  association?  A.  An  assessment  endowment 
association. 

Q.  Has  it  a  life  insurance?  A.  We  have  several  plans;  life  or  endow- 
ment. 

Q.  Has  it  any  accident  insurance  scheme?  A.  You  may  call  it  so  if 
you  wisK     It  is  partly  so. 

Q.  I  want  to  know  if  there  is  anything  not  embraced — I  think  you 
cover  the  whole  field  ?     A.  I  think  so. 

Q.  I  want  to  find  out  if  there  is  any  plan  you  have  omitted,  that  you 
have  not  tried  to  take  in  in  your  organization  ?  I  have  one  of  your  leaf- 
lets.    A.  It  embraces  it  all. 

Q.  It  appears  to  me  from  this,  Mr.  Collins,  that  you  have  tried  to  take  in 


51 

every  form?  A.  We  have  tried  to  give  them  the  latter  forms  of  insurance, 
that  we  consider  could  be  safe — absolutely  safe;  that  has  been  the  inten- 
tion, nothing  else.     If  there  is  a  better  plan  in  the  field  I  fail  to  find  it. 

Q.  Your  organization  is  the  fourth  resurrection,  is  it  not,  of  the  original 
Texas  concern  that  was  founded  by  Mr.  Russell?     A.  I  could  not  tell. 

Mr.  Spelling:  Five  defunct  ones. 

Colonel  Tobin:  I  suppose  it  is  the  representative  of  all  those  plans? 

Q.  Has  your  association  levied  an}^  assessment?  A.  The  assessments 
are  payable  monthly. 

Q.  Can  you  approximate  the  number  of  members  ?     A.  I  could  not,  sir. 

Q.  Do  you  know  the  amount  paid  in?     A.  I  have  no  idea. 

Q.  Do  you  know  when  the  report  is  to  be  issued  of  your  organization? 
A.  I  cannot  say  when  the  report  is  called  for  or  not;  I  don't  know  whether 
it  is  printed;  I  cannot  give  you  that  information. 

Q.  Can  you  tell  how  many  members,  at  the  present  time,  were  formerly 
members  of  the  Occidental?     A.  No,  sir;  I  cannot. 

Mr.  Spelling:  You  are  the  President  of  the  Western  Mutual,  and  you 
say  you  have  never  examined  any  of  its  books,  and  know  nothing  of  its 
condition?  A.  I  have  looked  over  the  books  occasionally;  but  the  mone- 
tary matters  I  don't  know  anything  about;  I  have  made  no  examination. 

Colonel  Tobin:  Who  is  Treasurer  of  your  organization?     A.  Mr.  Leshir. 

Q.  Mr.  Leshir  is  Vice-President?  A.  There  has  been  a  change  in  the 
officers;  there  is  no  Treasurer,  because,  as  yet,  there  are  no  funds  in  hand. 
We  have  selected,  I  think,  Wells-Fargo  as  depositary. 

Q.  Who  elected  the  officers  ?  A.  They  were  elected  at  the  time  of  the 
incorporation. 

Q.  Has  there  been  any  change  in  the  officers?  A.  I  was  elected  Vice- 
President,  and  when  Pollock  went  away  I  was  elected  President.  Mr. 
Leshir  was  Treasurer,  and  he  has  been  made  Vice-President. 

Mr.  Spelling:  Was  your  organization  undertaken  for  your  own  profit  or 
for  the  profit  of  other  people?  A.  There  was  no  profit  in  it  for  several 
years. 

Q.  You  undertook  it  out  of  pure  benevolence,  and  in  the  interests  of 
other  people?  A.  It  was  the  idea,  expecting  that  in  the  course  of  years 
there  would  be  a  reasonable  margin  of  profit.  My  idea  was  to  get  together 
and  to  save  others  and  myself  if  possible. 

Q.  You  have  received  your  coupon  in  the  Occidental,  have  you  not? 
A.  Never  received  a  cent. 

Q.  Do  you  know  what  became  of  Mr.  Pollock — you  say  that  he  has 
gone  away?     A.  I  do  not. 

Q.  So  you  undertook  it  unselfishly  in  the  interests  of  other  people.  Was 
not  Mr.  Leshir  connected  with  the  Occidental  at  one  time?  A.  That  I 
could  not  tell  you;  never  met  the  gentleman  till  the  time  we  organized. 

Q.  Do  you  know  how  much  money  per  month,  on  an  average,  was  col- 
lected and  forwarded  to  the  Occidental  by  you  as  Club  Manager?  A.  I 
cannot  tell. 

Q.  You  can  approximate  it;  say?  A.  I  guess  somewhere  in  the  neigh- 
borhood of  $275  to  $300;  it  would  average  that. 

Q.  How  long  were  you  Club  Manager?     A.  From  its  inception: 

Q.  How  long?     A.  Four  years;  oh,  yes,  six  years. 

Q.  What  was  your  compensation 'as  Manager?  A.  It  is  laid  down  in 
the  by-laws. 

Q.  We  have  not  the  by-laws.  I  don't  know  if  we  can  get  them.  I 
doubt  if  they  have  been  written  out.  A.  Part  of  the  time  8  cents  a  mem- 
ber, and  part  of  the  time  10  cents  a  member. 


52 

Q.  For  each  month  ?     A.  For  each  month — so  much  per  capita.     It  is 
not  a  very  heavy  salary. 


W.  F.  Hughes. 

Called  as  a  witness,  and  sworn. 

Mr.  Spelling:  What  is  your  business,  Mr.  Hughes?  Answer — I  am 
doing  a  general  commission  business — real  estate  and  auction  business, 
fire  insurance. 

Q.  Are  you  acquainted  with  the  operation  of  mutual  assessment  and 
endowment  associations  in  the  City  of  San  Jose  ?  A.  I  cannot  say  that  I 
am  much  acquainted.     I  have  had  some  acquaintance  in  the  Occidental. 

Q.  Do  you  know  from  the  experience  and  statements  of  others  some- 
thing about  the  extent  of  those  operations?  A.  The  extent  of  those  mutual 
endowment  associations? 

Q.  Yes?  A.  Yes;  I  know  something  about  that.  I  know  there  are 
quite  a  number  of  them  represented  in  San  Jose,  and  they  have  done  a 
great  deal  of  business  there.  You  are  talking  about  these  associations 
generally? 

Q.  Does  the  Western  Mutual  Benefit  Association,  among  others,  do  busi- 
ness in  that  city?  A.  I  know  nothing,  I  might  say,  about  the  working  of 
that  association.  I  have  had  circulars  from  them;  was  in  their  office  one 
time,  and  talked  with  Mr.  Pollock  when  he  was  President;  and  I  talked 
with  Mr.  Jones,  who  was  the  Financial  Secretary  of  the  Occidental,  and 
also  with  Mr.  Riddle  (very  few  words  with  Mr.  Riddle)  in  regard  to  the 
Western  Mutual. 

Q.  Did  he  ask  you  to  join  the  Western  Mutual?  A.  Yes;  he  did.  I 
cannot  remember  the  date  that  I  was  there,  but  it  was  after  the  date  that 
they  moved  into  their  office.  No.  10,  Flood  Building.  I  was  in  their  office 
there. 

Q.  You  found  Mr.  Jones  and  Mr.  Riddle  there?  A.  Yes;  and  a  gentle- 
man whose  name  has  been  mentioned  here;  he  is  the  Secretary,  Morelli. 

Q.  Do  you  know  of  any  discrimination  they  made  among  the  members 
in  the  Occidental  in  the  proposition  that  is  contained  in  their  circulars? 
Do  you  know  of  any  offers  to  a  certain  class  of  Occidental  members  that 
were  less  favorable  than  those  offered  to  another  class  of  members?  A. 
Well,  as  to  that,  I  would  have  to  answer  simply  as  my  opinion.  I  should 
say,  and  told  them  so — I  told  Mr.  Jones  so  at  the  time  I  talked  to  him — 
that  would  be  a  matter  of  opinion,  and  no  other  to  verify  what  I  say — I 
asked  Mr.  Jones  why  it  was  that  I,  Mr.  Levy,  and  Mr.  Leonard,  and  Mr. 
Posell,  and  one  or  two  others  had  received  no  circulars;  and  he  explained 
the  matter  that  it  must  have  been  an  oversight.  I  asked  him  if  it  was 
not  strange  that  he  should  have  overlooked  so  many  of  those  who  had 
been  paying  so  much  money  into  the  Occidental — into  the  original  institu- 
tion— as  I  understood  this  was  to  take  the  place  of  the  Occidental;  and 
he  said  to  me  that  it  was  only  an  oversight,  and  desired  to  give  me  circu- 
lars to  take  up.     I  declined  the  offered  proposition,  but  I  took  one  myself. 

Q.  Is  it  not  the  fact  that  those  who  were  overlooked  in  that  proposition, 
or  left  out,  were  those  whose  coupons  were  about  to  mature?  A.  That 
was  the  fact. 

Q.  And  those  to  whom  the  proposition  was  made  were  those  whose  cou- 
pons had  a  long  time  to  run  before  they  would  mature?  A.  It  is  a  matter 
of  fact,  because  the  coupons  of  those  whose  names  I  mentioned  would 
mature  in  a  very  short  time;  and  I  put  that  question  to  him,  if  it  was  not 


53 

for  the  purpose  of  avoiding  the  responsibility  of  those  whose  coupons  would 
mature  at  an  early  date;  and  he  remarked  that  it  was  an  oversight;  and 
I  remarked  that  it  was  a  singular  oversight. 

Q.  And  you  inferred  that  those  who  had  created  trouble  in  the  old  asso- 
ciation were  those  whose  coupons  were  about  to  mature,  according  to  that 
circular?  A.  I  don't  know  about  that;  I  don't  know  what  you  mean  by 
creating  trouble,  unless  he  meant  by  asking  for  loans. 

Q.  This  discrimination?  A.  I  understand,  as  a  matter  of  course,  those 
who  were  creating  trouble  were  those  who  would  be  wanting  their  money 
very  soon. 

Q.  Was  the  proposition  an  offer  to  pay  your  coupons  when  they  matured 
in  the  Occidental,  or  at  a  later  period  than  that?  A.  The  proposition 
made  to  me  was  that  we  must  answer  for  the  same  amount  that  we  had 
been  carrying  in  the  Occidental,  and  that  at  the  end  of  the  period  when 
our  first  coupons  would  mature  in  this  first  organization,  we  would  then 
receive  the  coupon  due  in  the  Occidental.  I  asked  Mr.  Jones  how  were 
they  going  to  meet  that,  if  they  could  not  pay  the  Occidental  coupon  now; 
as  a  business  proposition,  as  a  present  proposition,  how  they  were  to  pay 
both  coupons  at  the  end  of  a  fixed  term;  mine  would  be  about  four  years, 
and  that  was  what  I  think  it  was  in  the  Occidental. 

Q.  I  will  read  this  proposition:  They  must  become  members  of  the 
Western  Mutual  Benefit  Association  for  at  least  the  amount  of  the  coupon 
allotted  them?     A.  Yes. 

Q.  The  new  contract  to  date  from  the  date  of  maturity  of  his  or  her 
coupon  if  you  become  a  member  in  the  Western  Mutual  ?  A.  Yes ;  that 
is  correct. 

Q.  If  your  coupon  matured  the  first  of  May,  1889,  the  certificate  in  the 
Western  Mutual  Benefit  Association  was  dated  the  first  of  May,  so  that 
that  coupon  which  would  have  matured  in  the  Occidental  did  not  become 
due  in  the  Western  Mutual  Benefit  Association  until  a  number  of  years 
afterwards?     A.  Yes. 

Q.  The  new  contract  to  date  from  date  of  maturity  of  his  or  her  coupon 
was  the  date  of  refunding  assessments,  as  specified  in  the  coupon? 
A.  Yes. 

Q.  Mr.  Hughes,  as  a  general  proposition  in  reference  to  their  financial 
condition,  were  members  in  the  Occidental  and  other  associations  of  its 
kind  in  San  Jose?     A.  Their  financial  condition? 

Q.  Yes;  and  their  occupations.  Speak  of  that  in  your  own  way?  A.  I 
am  fully  convinced  that  the  great  majority  of  them  are  poor  people.  I 
speak  from  the  fact  that  I  had  a  list  of  the  members  of  the  Occidental  in 
San  Jose;  and  in  looking  over  that  list,  my  impression  is  that  two  thirds 
of  that  list  were  laboring  people —people  that  have  very  little  means — were 
generally  laboring  people.     There  were  some  exceptions  to  that. 

Q.  In  some  instances,  were  they  not  ignorant  and  credulous  people  ?  A. 
Yes ;  quite  a  number  of  cases  were  people  who  were  hardly  competent  to 
judge  for  themselves — perhaps  a  great  number  of  them. 

Q.  Give  the  names  of  endowment  or  mutual  assessment  associations 
that  have  done  business  in  your  town  other  than  the  Occidental  and 
Western  Mutual  Benefit  Associations?  A.  It  is  very  hard  for  me  to 
remember  these  names.  I  know  a  number  of  them  when  I  hear  them. 
There  was  a  company  who  preceded  this;  that  was  the  same  as  the  Occi- 
dental— the  Occidental  is  the  successor.  There  was  a  company  organized 
in  Oakland,  the  Mutual  Benefit  Association  of —  I  can't  remember. 

Q.  Who  were  the  officers  of  it?  A.  The  President  of  it,  T.  H.  Jordan — 
W.  H.  Jordan — he  is  the  head.     I  took  out  a  policy  in  that  myself  at  one 


54 

time  and  all  I  paid  was  the  initiation  fee.  But  I  am  not  familiar  with  the 
names  of  these. 

Q.  Is  there  one  association  that  Jordan  is  President  of  called  the  Work- 
ingmen's  Guarantee  Fund  Association — that  is  what  the  mutual  endow- 
ment association  of  Oakland  is  called?     A.  That  is  it. 

Q.  Dr.  Smith  and  Mr.  A.  M.  Thompson  were  connected  with  the  Self- 
Endowment  Association.  Do  you  know  anything  about  it;  did  it  do  some 
business  in  your  town?  A.  I  could  not  answer;  I  remember  the  name, 
but  I  could  not  say  about  it. 

Q.  Did  the  Pacific  Endowment  League  do  some  business  there  ?     A.  Yes. 

Q.  Has  it  a  membership  there  now?     A.  I  cannot  say. 

Q.  Do  you  know  who  is  the  collector  for  it?     A.  No. 

Q.  It  did  business  in  San  Jose,  did  it?  A.  It  did  business  in  San  Jose. 
I  had  its  circulars  left  in  my  box  frequently,  and  the  agents  called  on  me. 

Q.  Do  you  know  George  Kirber  and  Ida — Mrs.  E.  M.  HoefFer?    A.  I  do. 

Q.  What  is  the  financial  condition  of  these  parties?  A.  Mr.  Kirber  is 
in  easy  circumstances;  he  is  hard  working,  but  he  has  some  property. 
Mrs.  Hoeffer  is  a  poor  woman — a  very  poor  woman,  and  had  a  hard  strug- 
gle to  pay  her  assessments.     That  I  know  of. 

Q.  How  long  did  she  pay?  Can  you  give  the  sum  total?  A.  I  put  it 
down;  she  told  me  what  she  paid. 

Q.  Did  you  get  a  statement  from  her  signed  by  her?     A.  I  did. 

Mr.  Spelling:  The  statement  is  as  follows:  Has  paid  in  $350  the  first 
year;  more  afterwards.  Signed,  Mrs.  E.  M.  Hoeffer.  A.  I  don't  know 
exactly  how  much  she  paid.     She  was  a  member  of  the  Occidental. 

Colonel  Tobin:  Did  she  get  any  money  in  return?  A.  I  would  not  be 
positive  whether  she  ever  received  a  loan  or  not.  Her  coupon  was  never 
paid.     Her  coupon  is  due — past  due. 

[Statement  read  of  Lewis  Griepenstruck,  George  Kirby,  witness.] 

Q.  Are  there  many  more  cases  similar  to  this  to  your  knowledge  in  San 
Jose,  Mr.  Hughes  ?  A.  There  are  quite  a  number  of  other  cases  there  in 
which  it  has  worked  a  great  hardship;  I  can't  remember  names.  I  know 
there  is  one  woman,  a  widow,  who  lived  out  not  a  great  way  from  Santa 
Clara,  and  who  has  come  down  to  see  me  several  times;  but  I  am  very 
poor  of  remembering  names. 

Q.  How  much  has  she  paid  in?  A.  She  has  paid  in  for  about  three 
years.  Her  policy  is  about  $2,000.  She  has  paid  in  $350.  She  was  so 
poor  that  she  could  not  raise  $10  to  join  in  the  suit  against  the  Occidental. 

Q.  Did  one  of  her  coupons  become  due?  A.  Her  coupon  was  due;  and 
she  could  not  raise  $10  to  go  into  the  suit;  that  was  the  fact. 

Q.  Do  you  know  of  any  other  instance?  A.  I  could  not  give  names. 
[Mr.  Spelling  hands  witness  a  list  of  names;  witness  reads.]  At  least  two 
thirds  of  these  people  are  poor  and  laboring.  In  looking  over  the  list  I 
could  mention  a  number  of  names,  but  people  object  sometimes  to  having 
their  financial  condition  exposed. 

Mr.  Spelling:  State  in  regard  to  a  conversation  you  had  with  Mr.  Rid- 
dle about  folding  and  sending  out  circulars,  about  the  time  of  the  collapse 
of  the  Occidental  ?  A.  On  Monday — I  believe  the  Occidental  was  attached 
either  Friday  or  Saturday,  about  the  twenty-third  of  March — I  could  not 
give  dates  exactly — on  the  Monday  following  I  came  to  San  Francisco; 
went  to  the  ofiice  of  the  Occidental  to  ascertain  the  condition  of  things; 
did  not  know  that  it  was  attached.  Mr.  Riddle  invited  me  out,  and  we 
had  a  conversation  in  reference  to  the  Occidental  and  its  future  plans.  He 
stated  to  me  that  he  had  known  for  a  long  time  that  the  Occidental  could 
not  run.     I  asked  him  why,  then,  professing  to  be  a  friend  of  mine,  he  did 


55 

not  tell  me  in  October  previous,  when  I  had  a  talk  with  him,  what  was  its 
condition.  And  he  said,  "I  did  not  dare  do  it."  He  said:  "If  you  and 
everybody  else  had  put  your  shoulders  to  the  wheel  and  helped  to  get  new 
members,  we  might  have  gone  along."  I  said:  "Judge  Riddle,  I  could 
not  conscientiously  ask  a  man  to  join  the  Occidental  when  I  felt  that  it  was 
not  on  a  good  financial  basis."  And  he  admitted  to  me  then  that  he  had 
known  that  it  could  not  run;  and  he  said:  "  We  have  got  to  organize  a  new 
institution; "  and  he  says:  "  To  show  that  I  am  prepared  for  this  thing,  we 
have  a  full  copy  of  all  the  names  from  the  Occidental  books;  I  have  had 
circulars  printed  and  folded  and  in  the  envelopes  ready  to  post  to  each 
member  of  the  Occidental  to  whom  we  think  it  will  be  proper  that  we 
should  apprise  them,  or  those  of  them  who  would  make  desirable  mem- 
bers.'' He  says:  "There  are  some  Occidental  members  we  don't  want, 
but  we  are  prepared  now  to  send  these  circulars  out."  He  stated  positively 
that  he  had  been  expecting  this  thing  to  collapse  for  months — had  known 
that  it  could  not  run. 

Q.  Did  he  designate  the  class  of  members  that  were  not  desirable  in  the 
new  concern?  A.  I  cannot  say  that  he  did,  further  than  that  those  who 
were  going  to  press  their  claims — those  whose  claims  were  about  due  and 
were  about  to  press  their  claims — that  he  did  not  want  them.  He  asked 
me  to  become  a  Director  of  this  new  company. 


J.  S.  Ames. 

Colonel  Tobin:  What  is  your  name?    Answer — J.  S.  Ames. 

Q.  Where  do  you  reside?     A.  Santa  Rosa. 

Q.  What  is  your  occupation?    A.  Carpenter. 

Q.  You  are  not  a  capitalist?     A.  No,  sir. 

Q.  To  what  extent  did  you  invest  in  the  Occidental  Mutual  Benefit 
Association?     A.  Well,  about  between  $1,400  and  $1,600,  sir. 

Q.  Did  you  accept  the  propositions  made  by  the  Western  Mutual  Benefit 
Association,  or  did  they  make  any  to  you?  A.  They  made  propositions 
to  me. 

Q.  Were  you  a  member  of  the  Occidental  Endowment  Association?  A. 
I  was. 

Mr.  Spelling:  Do  you  know  what  proposition  the  Western  Mutual 
Benefit  Association  made  to  you?  A.  I  did  not  join  any  but  the  Occi- 
dental. 

Q.  Was  any  proposition  made  to  you  after  the  collapse  of  the  Occiden- 
tal, taking  it  for  granted  that  it  did  collapse,  by  any  other  association? 
A.  Mr.  Ridley  wrote  me  a  letter,  he  would  like  me  to  join  the  other. 

Q.  What  was  the  name — the  Western  Mutual  Benefit  Association,  was 
that  it?     A.  I  think  so. 

Q.  To  what  extent  did  you  invest  in  the  Occidental?  A.  Between 
$1,400  and  $1,600. 

Q.  How  much  were  you  insured  for  in  that  association  ?  A.  My  wife 
and  I  were  insured  in  all  for  $20,000— $10,000  each. 

Q.  For  how  many  years  did  you  continue  to  pay  assessments?  A.  Paid 
assessments  for  about  four  and  one  half  years. 

Q.  The  sum  total  paid  in  by  you  for  yourself  and  wife  amounted  to  how 
much?     A.  In  the  neighborhood  of  $1,400  to  $1,600. 

Q.  Did  any  of  your  coupons  mature?     A.  One. 


56 

Q.  How  much  was  the  amount  of  that  coupon'?  A.  One  thousand 
dollars. 

Q.  Did  you  get  that  amount  when  it  became  due?  A.  I  did  not  get 
anything — not  a  cent. 

Q.  Did  you  ever  talk  to  the  Directors  about  your  interest  in  the  Occi- 
dental?    A.  I  did. 

Q.  What  Directors?  A.  Dr.  Smit*h,  A.  P.  Overton,  T.  J.  Brookes— that 
is  what  I  call  him — it  may  have  been  Brook. 

Q.  What  is  Mr.  Overton's  occupation — is  he  not  a  President  of  a  bank?' 
A.  I  think  so,  sir. 

Q.  A  railroad  builder?    A.  I  do  not  know  about  the  railroad. 

Q.  Is  he  not  building  a  railroad  to  Sebastopol?     A.  I  do  not  know. 

Q.  You  say  you  talked  with  those  men,  tell  us  what  they  said?  A. 
They  told  me  to  stick  to  it,  and  when  my  coupons  became  due  I  would  get 
the  amount  due. 

Q.  What  policies  were  you  carrying?  A.  Four.  Two  of  my  own  and 
two  of  my  wife. 

Q.  For  $10,000  each?    A.  Each. 

Q.  You  were  insured  first  in  the  Santa  Rosa?  A.  Last  in  the  Santa 
Rosa.  First  in  the  old  office — the  Texas  Endowment  Association.  They 
made  it  all  over  in  one  some  way. 

Q.  Did  you  make  any  complaint  to  these  Directors  about  the  non-pay- 
ment of  your  coupons,  and  the  refusal  or  failure  to  make  loans  to  you? 
A.  Yes;  whenever  I  saw  them  I  did.  I  did  not  complain  very  much.  I 
am  not  one  of  that  kind. 

Q.  When  were  those  complaints  made?  A.  Right  along  for  the  last  year 
or  two. 

Colonel  Tobin:  Did  you  make  any  attempt  to  recover  what  was  due  to 
you  through  proceedings  at  law?    A.  I  did  not. 

Mr.  Spelling:  Tell  the  substance  of  the  reply  you  received  from  Over- 
ton, Dr.  Smith,  and  Mr.  Brookes.  Did  you  talk  to  Mr.  Carruthers  any? 
A.  I  did. 

Q.  Tell  in  your  own  way  what  reply  they  made,  if  any?  A.  They  all 
told  me  it  would  be  all  right.  Mr.  Carruthers  told  me  if  he  was  me  he- 
would  drop  part  of  it;  he  had  not  much  faith  in  it 

Q.  Did  he  give  any  reasons  for  his  lack  of  confidence?    A.  No. 

Q.  Where  does  he  reside?     A.  He  resides  at  Santa  Rosa. 

Q.  What  positions  did  they  occupy  in  the  Santa  Rosa  Self-Endowment 
Association?     A.  They  were  Directors. 

Q.  What  position  did  Brookes  occupy,  also?  A.  Brookes,  I  believe,  was 
President. 

Q.  What  position  did  Mr.  Overton  occupy;  simply  a  Director?  A.  I 
think  so. 

Q.  Did  Smith  occupy  any  position  besides  being  a  Director?  A.  I  don't 
know. 

Q.  Was  he  not  medical  examiner?     A.  He  was;  he  examined  me. 

Q  All  but  Carruthers  told  you  that  it  was.a  safe  thing  for  a  year  or  two 
before  it  collapsed  ?  A.  They  told  that  to  me  right  up  to  the  time  it  col- 
lapsed— to  not  more  than  two  or  three  weeks  before. 

Q.  What  is  the  financial  condition  of  these  men,  speaking  in  a  general 
way?     A.  I  wish  I  was  as  well  off  as  either  of  them. 

Q.  Do  you  know  of  any  poor  laboring  men  or  widow  women  in  the  town 
of  Santa  Rosa  who  have  suffered  from  this  or  any  other  of  the  mutual 
endowment  kind?  A.  I  know  of  some  in  Santa  Rosa,  and  outside  of  it  I 
am  not  acquainted  much. 


Colonel  Tobin:  Are  you  a  member  of  any  endowment  association  at 
the  present  time,  Mr.  Ames?  A.  I  do  not  belong  to  any  of  them;  it  is  the 
only  one  I  belonged  to. 

Q.  Was  any  money  given  to  you  as  a  loan  from  that  association?  A. 
No,  sir. 

Q.  And  you  absolutely  lost  all  you  paid  in?     A.  Yes,  sir;  every  cent. 


John  F.  Smith. 

Colonel  Tobin:  What  is  your  full  name,  Mr.  Smith?  Answer — John 
F.  Smith. 

Q.  Mr.  Smith,  where  are  you  from?     A.  From  Santa  Rosa,  sir. 

Q.  You  were  a  member  of  the  Occidental?  A.  Yes,  sir.  My  wife  was 
insured  in  the  Occidental. 

Q.  You  were  not  yourself?  A.  No;  it  was  my  wife,  but  I  always  paid 
it,  and  attended  to  it. 

Mr.  Spelling:  Do  you  know  of  any  other  members  in  Santa  Rosa? 
A.  Yes;  of  quite  a  number. 

Q.  Do  you  know  Mrs.  Elizabeth  Willoughby,  who  resides  down  not  far 
from  the  McNear  Hotel,  on  Fourth  Street?  A.  No,  sir;  never  heard  of 
her;  don't  know  her.  I  know  Mrs.  Bennett,  a  lady  who  had  two  policies 
in  this  company;  her  husband  had  one  and  she  had  one. 

Q.  What  was  her  financial  c6ndition?  A.  Her  financial  condition  was 
very  low.  She  kept  paying,  all  the  time  expecting  to  get  paid  when  the 
coupon  became  due.  The  coupon  became  due  and  was  not  paid.  I  have 
the  facts  of  the  matter  here;  a  gentleman  gave  it  to  me  because  he  could 
not  come,  and  I  brought  it  down  with  me;  he  asked  me  to  bring  it  down 
here. 

[Statement  put  in  evidence.] 

Witness:  Now,  Mr.  Spelling,  if  you  will  let  me  make  a  statement. 

Mr.  Spelling:  Go  ahead.     Proceed,  Mr.  Smith. 

Witness:  I  took  out  a  policy,  November  24,  1885,  and  paid  on  that  pol- 
icy regularly  every  month  up  to  1888,  when  they  commenced  to  assess 
double.  I  used  to  pay  $10  a  month;  in  1886  and  1887  it  was  $10  a  month, 
and  March  2,  1887,  I  paid  $20  double  assessments.  Then  along  from  that 
time  up  to  1889  I  paid  $20  a  month.  We  had  an  insurance  of  $10,000, 
and  always  paid  regularly  and  promptly;  but  when  I  took  this  insurance 
out  first,  they  told  me  that  in  six  months  I  would  get  $200,  and  that  this 
would  keep  the  payments  up.  I  thought  it  was  a  pretty  good  thing;  but 
I  never  got  a  cent.  I  went  to  them,  however,  a  great  many  times  and 
tried  to  get  money,  but  they  were  always  embarrassed — could  not  pay 
anything. 

Q.  Did  you  talk  to  those  Directors?  A.  I  talked  to  Mr.  Brookes,  to 
Judge  Overton,  and  I  talked  to  Mr.  Riddle,  and  they  always  gave  me  to 
understand  that  the  thing  was  on  a  good  sound  basis.  All  I  had  to  do 
was  to  pay  my  money,  and  when  the  coupon  became  due  I  would  get  my 
money  back.  But  the  Financial  Secretary,  Mr.  W^ood,  when  1  went  to 
him  to  get  a  payment  on  the  coupon,  he  said  that  it  was  impossible;  that 
he  could  not  pay;  that  in  three  months  he  would  pay.  He  told  me  it  was 
a  business  office;  in  three  or  four  months  more  he  would  pay.  I  had  so 
much  money  insured  I  had  to  give  it  up.     I  paid  in  $680. 

Q.  To  cover  that  policv?  A.  Up  to  the  smash,  I  had  paid  up  to  March 
$680.     I  had  paid  $700  when  they  bursted,  but  I  got  $20  returned. 


58 

Q.  Was  the  coupon  due  at  that  time?  A.  The  coupon  would  mature 
on  the  eighteenth  of  November. 

Q.  They  collapsed  in  March?  A.  Yes,  sir;  but  they  always  told  me 
that  the  thing  was  straight. 

Q.  Was  there  any  effort  to  get  you  to  join  the  Western  Mutual?  A.  Yes, 
sir;  after  they  collapsed  I  received  a  letter  and  went  to  the  office  in  the 
Flood  building,  and  Mr.  Riddle  told  me  that  if  I  would  join  that  I  would 
in  six  months  get  one  third  of  my  money,  and  in  another  six  months  get 
another  third. 

Q.  Did  you  join?     A.  No. 

Q.  Why?     A.  I  did  not  have  any  confidence  in  the  people. 

Q.  Did  you  recognize  most  of  the  old  hands  in  the  Occidental?  A. 
They  were  ail  there,  I  guess,  mostly.  Mr.  Riddle  said  he  was  there  only 
to  help  them  out.     I  guess  he  was  the  Prime  Minister  of  the  whole  thing. 

Q.  Then  you  thought  it  better  not  to  throw  good  money  after  bad?  A. 
I  thought  so. 

Q.  Were  you  not  required  to  give  up  your  Occidental  policy?  A.  He 
said  all  of  us  that  would  execute  a  bond  to  them,  they  would  see  that  they 
got  their  money  back. 

Q.  Did  you  talk  with  Brookes  ?  A.  He  said  he  thought  that  the  West- 
ern Mutual  was  a  good  thing;  he  was  going  to  join  it  himself,  and  was  the 
only  way  to  get  our  money  back.  I  could  not  see  it  that  way,  and  I  did 
not  join. 

Q.  What  members  of  the  Occidental  do  you  know  in  Santa  Rosa?  A. 
I  know  Mr.  Peck. 

Q.  What  is  Peck's  financial  condition?  A.  He  works  for  a  living  every 
day.     I  know  Mr.  Kewy;  he  lives  close  to  my  house;  he  works  every  day. 

Q.  Do  you  not  know  some  widows  and  poor  men  in  this  institution?  A. 
There  was  one  woman  came  to  my  house.  I  told  the  woman  that  it  was 
very  foolish  to  be  worrying  about  it — that  it  was  as  safe  as  if  in  the  bank; 
I  thought  so  myself     I  believe  she  got  $500;  her  son  is,  I  think,  a  lawyer. 

Q.  That  probably  accounts  for  it?  A.  I  don't  remember  her  name.  She 
came  to  my  house,  and  I  told  her  I  thought  the  money  was  as  safe  as  in 
the  bank,  as  I  had  every  confidence  in  the  men  who  told  me  so,  Mr. 
Brookes  and  Mr.  Overton. 

Q.  Did  they  tell  you  that  it  was  as  safe  as  in  the  bank  ?  A.  I  told  that 
lady  so.  Mr.  Brookes  told  me  that  it  was  perfectly  safe;  that  everything 
was  straight  and  square. 

Colonel  Tobin:  Did  Mr.  Overton  tell  yoa  that?  A.  I  spoke  to  Mr.  Over- 
ton a  long  time  ago,  and  he  told  me  everything  was  all  right. 

Q.  Is  not  Mr.  Overton  a  banker  in  Santa  Rosa?  A.  He  is  President  of 
the  savings  bank. 

Q.  Is  he  not  building  a  railroad  to  Sebastopol — helping  to  do  it;  one  of 
the  Directors?  A.  I  don't  know  whether  he  is  interested  in  it  or  not.  He 
is  always  interested  in  anything  Mr.  Donahue  is  undertaking. 

Q.  He  has  to  do  with  the  management  and  control  of  railroads  in  that 
county?     A.  I  think  he  has;  I  would  not  be  positive. 

Q.  Don't  you  know  he  is  one  of  the  Directors — a  builder  of  the  S.ebastopol 
road?     A.  I  heard. 

Q.  What  is  Mr.  Brookes?     A.  He  is  a  farmer  in  San  Joaquin  County. 

Q.  Does  he  work  on  his  farm?  A.  He  has  some  one  working  on  it  for 
him. 

Q.  Is  he  a  poor  man  or  a  rich  man?  A.  He  is  not  a  poor  man.  He 
lives  on  his  farm. 

Q.  What  position  does  he  occupy  in  Santa  Rosa?    A.  I  think  he  is  one 


59 

of  the  Directors  of  the  Southern  Pacific  Methodist  College,  or  Pacific 
Methodist  College. 

Q.  Don't  you  know  Mrs.  Elizabeth  Willoughby,  that  lives  across  the 
street?     A.  I  know  her  boy,  but  I  don't  know  her. 

Colonel  Tobin  read  the  sworn  statement  of  Mrs.  Elizabeth  Wilson, 
September  20,  1889. 

Colonel  Tobin:  We  have  a  large  amount  of  correspondence  from  differ- 
ent parts  of  the  State  of  the  same  character. 


A.  W.  Bishop. 

Colonel  Tobin:  What  is  your  full  name?    Answer — A.  W.  Bishop. 

Q.  You  are  Secretary  of  the  Mutual  Endowment  of  Oakland?    A.  Yes. 

Q.  The  Mutual  Endowment  has  been  in  existence  five  years  ?  A.  Since 
August  7,  1884. 

Q.  Yours  is  an  incorporated  society  ?     A.  Yes. 

Q.  Your  plan,  besides  endowment,  is  also  sick  and  relief?  A.  There  is 
both  life  and  endowment — separate  and  distinct  from  each  other — and  the 
only  relief  feature  is  that  when  members  are  disabled  through  sickness  or 
accident,  we  loan  them  $2  on  each  $1,000  on  the  face  of  their  policy  for  a 
period  not  exceeding  eight  weeks  in  any  one  year,  to  tide  them  over  any 
disability,  so  that  they  would  not  lose  their  membership  from  being 
disabled. 

Q.  Have  the  rates  of  endowment  been  increased  since  the  date  of  your 
incorporation?     A.  They  have  been  increased  very  materially. 

Q.  To  what  extent?    A.  Well,  about  50  per  cent. 

Q.  What  was  the  cause  of  the  change  in  the  rates?  A.  We  found  that 
the  rates  we  adopted  first  would  not  meet  the  liabilities,  and  therefore  they 
were  increased. 

Q.  How  long  after  the  date  when  this  organization  was  started  was  this 
change  made  ?     A.  About  a  year  and  a  half. 

Q.  Then  the  new  plan  has  been  in  existence  about  three  and  a  half 
years?     A.  Yes,  sir. 

Q.  Tell  what  was  the  rate  of  assessment  on  $1,000,  say  an  average  age 
of  forty  at  first?     A.  It  was  90  cents. 

Q.  What  is  it  at  the  present  time?     A.  It  is  $1  20. 

Q.  Do  you  consider  anything  under  $1  20  to  be  a  safe  form  of  assess- 
ment ?    A.  I  do  not. 

Q.  Do  you  believe  that  any  endowment  association,  assessing  its  mem- 
bers only  $1  or  under,  where  the  coupon  would  mature  in  five  years,  would 
be  a  safe  plan?  A.  No,  sir;  I  don't  think  it  would.  I  am  speaking  of 
course  on  a  basis  of  $1,000  now.     I  don't  think  it  would  be  safe. 

Q.  How  many  members  had  you  who  were  entitled  to  coupons  under 
the  old  plan?    A.  Well,  it  was  about  two  hundred  at  the  time. 

Q.  Have  the  coupons  of  these  two  hundred  about  matured  ?  A.  Some 
of  these;  most  of  them,  that  are  still  members,  they  will  mature — well, 
some  of  them  will  extend  into  next  year. 

Q.  About  how  much  would  a  member  under  the  present  system  pay 
into  your  organization  in  seven  years  when  the  coupons  mature — seven 
years  is  your  limit ?     A.  Seven  years  at  forty? 

Q.  Seven  years  at  forty,  I  am  speaking  of  that?  A.  I  stated  that  hastily, 
and  I  ma}^  be  mistaken.     [Looks  at  card.] 

Q.  This  will  be  a  coupon  that  will  be  due  in  a  period  of  seven  years  of 


60 

$1,000?  A.  We  pay  in  the  association  $105  30,  and  get  $200.  The  $1,000 
would  extend  through  a  period  of  thirty-five  years. 

Q.  $105  30  in  seven  years  would  get  $200?  A.  He  is  paying  on  the 
same  amount  through  a  period  of  thirty-five  years — of  course  it  would  be 
less;  of  course  the  interest  for  the  thirty-five  years  would  make  his  pay- 
ments for  the  last  years  necessarily  smaller  than  the  first;  but  multiplying 
that  by  five  would  give  the  total  amount  that  he  would  pay  in  during  the 
thirty-five  years.  It  would  take  thirty-five  years  for  him  to  get  the  full 
$1,000. 

Q.  You  say  that  there  are  about  two  hundred  members  on  the  old  plan 
entitled  to  coupons?     A.  Yes. 

Q.  About  what  was  the  average  length  of  coupons  at  that  time  on  the 
old  plan?  A.  They  were  the  same,  excepting  from  the  ages  of  fifty  to 
fifty-five  the  period  was  decreased  down  to  four  years.  We  took  them  in 
up  to  sixty;  but  after  fifty-five,  under  the  old  plan,  one  coupon  was  can- 
celed, if  they  were  fifty-nine;  two  coupons  above  fifty-nine;  but  under  the 
new  plan  there  is  no  coupon  matures  in  less  than  five  years,  and  no  mem- 
ber is  admitted  at  the  age  of  over  fifty-five  years. 

Q.  Was  not  the  old  plan  more  beneficial  or  advantageous  to  members 
than  the  new  plan?  A.  Oh,  materially  so.  It  was  disadvantageous  to  the 
association  as  an  association. 

Q.  Now,  Mr.  Bishop,  was  the  reason  for  your  making  the  change  in  your 
assessment  plan  founded  on  the  fact  that  you  saw  that  you  could  not  carry 
out  your  contract  with  your  shareholders  on  the  original  plan?  A.  That 
was  the  cause  of  changing. 

Q.  Or  your  concern  be  destroyed  if  continued  on  the  original  plan?  A. 
No  doubt  of  it. 

Q.  Under  your  system  have  you  been  able  to  meet  all  demands?  A. 
Every  payment  has  been  met  the  day  it  was  due,  and  we  have  $50,000  in 
our  reserve  fund. 

Q.  I  would  ask  you  by  way  of  comparison:  Does  your  association  charge 
a  much  higher  rate  of  assessment  than  any  other  endowment  associations? 
A.  I  think  our  charges  are  the  highest  of  the  kind  of  any  association 
doing  business  on  this  coast.  I  would  like  in  addition  to  add  to  that,  to 
state  while  it  is  fresh  in  my  mind:  In  addition  to  the  endowment,  our  life 
rates  are  nearly  equal  to  the  old  line  companies.  They  are  the  same  as 
the  Fidelity  of  Pennsylvania — it  is  an  incorporated  organization,  that  is,  a 
mutual  company,  but  incorporated  under  the  laws  of  Pennsylvania,  but 
that  is  considered  what  they  call  the  old  line  companies — their  rates  are 
the  same  as  ours.  I  took  the  assessment  rate  of  the  New  York  Mutual 
Reserve. 

Q.  Have  you  had  experience  in  mutual  assessment  insurance?  A.  Well, 
more  or  less  for  the  past  ten  years. 

Q.  Would  you  explain  it  to  us  how  it  is  that  a  person  paying  $105  30 
into  your  organization  during  seven  years  would  be  able  to  get  $200  at  the 
end  of  that  period  ?  A.  It  is  on  the  principle  that  has  been  found  to  be 
correct  in  all  insurance  companies  and  associations — not  only  old  line,  but 
mutual  and  cooperative  associations— that  there  is  an  average  in  the  whole 
case  of  20  per  cent  of  lapses  each  year;  and  that  lapse  is  in  fact  the  basis 
of  the  accumulation  of  many  millions  of  dollars  which  the  big  companies 
have  now  as  their  surplus — it  is  from  lapses.  Taking  for  instance  the 
Pacific  Mutual,  they  have  on  their  books,  I  think,  some  twenty  thousand 
names  of  members  who  have  joined  it,  have  continued  their  membership 
through  different  periods  of  time,  and  I  think  they  are  carrying  now  as 
persons  whose  policies  are  still  in  force,  some  four  or  five  thousand.     That 


61 

shows  the  number  of  lapses  that  will  occur  in  all  insurance  companies  and 
associations.  They  pay  their  money  in  and  through  some  cause  or  other 
quit. 

Q.  What  other  foundation  do  you  depend  upon  besides  this?  A.  The 
other  is  the  interest  upon  the  amount  of  money  that  is  paid  in  through  the 
period  of  time  before  the  member's  endowment  becomes  due.  These  two 
accumulations  are  the  only  basis  upon  which  you  can  reduce  the  actual 
amount. 

Q.  Don't  you  depend  upon  the  influx  of  new  blood,  upon  the  receipts  of 
new  members  coming  in?  A.  You  have  got  to  keep  your  membership 
good;  but  if  you  depend  upon  nothing  more — if  you  depend  upon  the 
increase  of  membership  to  pay  the  amounts  due  old  members,  eventually 
then  you  would  fail. 

Q.  What  disposition  do  you  make  of  the  funds  of  your  association  in 
order  to  make  interest?     A.  It  is  loaned  upon  real  estate. 

Q.  Anything  on  loans?  A.  Our  by-laws  prohibit  the  loans  of  money  on 
anything  but  real  estate,  and  State,  county,  or  government  bonds,  with 
the  exception,  as  I  have  said  before,  of  the  small  amounts  that  we  loan  to 
members  when  they  are  disabled,  in  order  to  tide  over  their  difficulty; 
that  is,  a  loan  upon  which  they  pay  7  per  cent  interest. 

Q.  Does  your  loan  vary?     A.  From  Ave  to  ten  years. 

Q.  According  to  the  age  of  members  upon  entrance?     A.  Yes. 

Q.  How  many  funds  have  you  in  your  incorporation?  A.  Three.  The. 
general  fund  or  expense  fund.  The  second,  coupon  indemnity  fund,  which 
is  the  fund  for  the  payment  of  coupons  maturing,  either  by  death  or  by 
expiration  of  time;  and  the  reserve  fund,  which  is  not  to  be  less  than 
$50,000,  which  we  have  now  fully  paid  in. 

Q.  How  often  are  financial  reports  published?     A.  Semi-annually. 

Q.  Are  they  printed?    A.  Yes. 

Q.  Are  they  distributed?     A.  Yes;  distributed  to  every  member. 

Q.  Do  these  reports  contain  full  details  of  the  receipts  and  disburse- 
ments of  each  fund?  A.  It  does  in  detail  of  the  coupon  indemnity  fund 
and  of  the  reserve  fund,  but  not  of  the  general  fund — not  in  detail. 

Q.  How  is  it  that  you  do  not  detail  in  the  publication  of  the  expense  or 
general  fund?  A.  Well,  there  is  no  reason,  except  that  to  publish  it  in 
detail  would  require  a  very  large  space  of  the  papers. 

Q.  I  notice  in  all  the  fraternal  organizations  they  publish  in  detail  the 
receipts  and  disbursements  of  the  expense  fund;  why  should  it  not  be 
done  by  an  association  such  as  yours?  A.  I  don't  know  but  that  it  would 
be  good  policy  to  do  so. 

Q.  Are  the  moneys  paid  out  by  yourself,  as  Secretary,  or  are  they  paid 
out  by  warrant  on  the  treasury?  A.  Every  dollar  paid  out  of  any  descrip- 
tion of  fund  is  on  warrant,  and  not  upon  anything  else. 

Q.  For  each  warrant  paid  out,  have  you  the  date  and  name  and  address 
stated  in  the  warrant?     A.  Yes. 

Q.  But  no  reports  of  your  disbursements  have  ever  been  published  ?  A. 
None,  excepting  the  general  amounts. 

Q.  By  whom  can  your  by-laws  be  altered  or  amended?  A.  At  the 
annual  meeting  of  the  members  of  the  association,  by  a  majority  vote,  or 
by  a  two-thirds  vote  of  the  Board  of  Directors. 

Q.  At  any  stated  time  in  the  interim  between  the  meetings  of  the  asso- 
ciation?    A.  Only  at  regular  meetings. 

Q.  If  a  change  is  made  in  any  of  the  by-laws,  is  that  change  published 
and  sent  to  all  the  members?     A.  Yes. 


62 

Q.  Are  3^our  books  open  to  members?  A.  Any  member  has  the  right 
to  inspect  the  books  at  any  time. 

Q.  Would  you  think  it  a  good  thing  to  place  associations  such  as  yours 
under  supervision?  A.  I  think  it  would.  We  had  a  bill  last  session 
placing  under  supervision  all  associations  of  every  description  of  life  or 
accident,  and  also  that  they  should  not  do  business  without  a  surplus  of 
$50,000. 

Q.  Did  you  see  the  bill  introduced  by  Mr.  Wadsworth?  A.  I  was  there 
at  the  time.  Our  bill  proposed  to  make  the  reserve  fund  $50,000,  which 
was  provided  by  our  by-laws.  It  was  cut  down  to  $25,000  to  accommodate 
some  other  associations  of  this  character. 

Q.  Who  introduced  your  bill?  A.  It  was  introduced  in  the  Senate  by 
Mr. — I  forgot  his  name.  There  were  four  or  live  bills  drawn,  and  we  met 
together — we  had  a  meeting  of  the  parties  interested  in  this  matter — and 
they  were  consigned  in  the  one  bill.  Our  bill  virtually  was  adopted,  with 
the  exception  of  the  amount  of  the  reserve  fund.  Mr.  Wadsworth's  bill 
was  embraced  in  ours,  with  the  exception  of  the  reserve  fund  and  some 
little  alterations  that  Mr,  Wadsworth  consented  to. 


J.  H.  Leonard, 
.Of  San  Jose. 

Mr.  Spelling:  What  position  do  you  occupy?  Answer — City  Treasurer 
and  Collector  of  San  Jose. 

Q.  Have  you  been  investing  in  the  Self-Endowment  Association?  A. 
Yes. 

Q.  Are  you  acquainted  with  the  financial  condition  of  the  class  of  people 
who  have  invested  in  such  associations  in  that  town?  A.  Not  particularly; 
only  in  a  general  way. 

Q.  Well,  in  a  general  way,  what  class  have  invested  in  these  associa- 
tions; are  they  working  people,  or  wealthy  people?  A.  The  majority  are 
working  people;  people  of  the  poorer  class. 

Q.  What  proportion  of  these  are  poor  people  that  work  for  their  daily 
living — two  thirds,  three  fourths?  A.  I  could  not  say  that;  but  the  major- 
ity are  working  for  their  daily  living  for  their  support. 

Q.  Do  you  know  what  associations  have  done  business  in  San  Jose?  A. 
I  don't  know — there  are  a  great  many  of  them. 

Q.  Do  you  know  the  Western  Mutual?  A.  I  know  of  it;  I  know  Mr. 
Collins  well. 

Q.  Did  you  have  any  conversation  with  the  President  of  the  Western 
Mutual  before  it  was  organized?  A.  I  did  before  it  was  organized,  and  at 
the  time  it  was  organized.  I  was  then  a  member  of  the  Occidental  that 
had  suspended,  and  Mr.  Collins  was  an  old  friend  and  Club  Manager,  and 
also  acted  as  a  deputy  of  the  managers  in  examining  the  organization  of 
the  Occidental. 

Q.  Tell  what  the  conversation  was?  A.  At  the  time  of  the  collapse  of 
the  Occidental  I  saw  him  and  asked  him  what  was  to  be  done.  He  said 
he  should  come  to  the  city  to  consult  with  other  members  and  consider 
what  arrangements  could  be  made  to  protect  the  old  members  of  the  Occi- 
dental. On  his  return  in  two,  three,  or  four  days,  he  said  they  had  not 
fully  completed  their  arrangements.  I  said  mine  would  mature  in  August 
of  this  year,  and  he  said  I  probably  would  not  get  any  pay  for  a  year.  I 
called  on  him  after  his  second  visit  to  the  city.  He  seemed  disinclined 
to  talk,  and  learning  my  coupon  would  mature  during  the  year  said  noth- 


63 

ing  would  be  paid  to  me;  that  they  could  not  receive  me  as  a  member; 
that  they  only  took  in  those  whose  coupons  had  matured  afterward. 

Q.  Whose  coupons  had  a  considerable  time  to  run?  A.  Yes,  sir;  that 
was  the  idea. 

Q.  Did  he  say  anything  to  you  as  to  the  source  from  whence  they 
obtained  for  him  the  list  of  names?     A.  He  did  not. 

Q.  Did  you  have  any  conversation  with  any  officer  or  any  Director  of 
the  Occidental  in  regard  to  that?  A.  I  did  not.  I  had  previously 
expressed  dissatisfaction  with  the  management  and  some  of  the  reports, 
and  Mr.  Collins,  after  his  visit  to  the  city  and  examination  of  the  books, 
stated  that  the  books  were  well  kept;  wished  that  I  could  see  them;  that 
their  affairs  were  entirely  honest,  and  were  flourishing  and  w^ould  succeed. 

Q.  That  is,  of  the  Occidental?     A.  That  is,  the  Occidental. 

Q.  How  much  did  you  pay  in?     A.  About  $325. 

Q.  How  much  did  you  receive?     A.  I  received  nothing. 

Q.  Your  coupon  did  not  mature?  A.  Did  not  mature.  It  was  to  have 
matured  in  August,  1889;  last  August. 

Q.  From  your  experience  what  class  of  persons  were  the  majority  of  the 
members  ?  Were  they  wage  earners,  people  dependent  on  their  daily  labor? 
A.  They  were,  the  majority  of  them. 

Q.  Was  it  while  the  Occidental  was  running  that  you  had  the  conversa- 
tion with  Mr.  Collins?  A.  It  was  just  after  it  had  suspended,  immedi- 
ately after. 

Q.  Did  you  not  have  a  conversation  with  Mr.  Riddle  before  that?  A. 
No,  sir. 

Q.  Did  he  not  tell  you  the  list  of  members  out  of  which  they  were  going 
to  form  the  Western  Mutual  ?    A.  No,  sir. 

Q.  Have  you  joined  the  new  organization?    A.  I  have  not. 

Q.  Why?  A.  I  have  no  confidence  in  it;  and,  as  I  understand  it,  they 
would  not  accept  me  as  a  member. 

Q.  Do  you  know  of  any  instances  of  poor  people  who  have  invested  ? 
A.  I  know  these  people  well.  [Looking  at  list.]  I  know  Mrs.  Sechtano 
and  Mrs.  Joseph  Ingram;  I  know  them  both. 

Colonel  Tobin:  This  is  a  widow  with  a  large  family  of  children?  A. 
Yes,  sir. 

Q.  Insured  for  $2,000?    A.  That  was  the  amount  of  her  first  coupon. 

Q.  How  much  did  she  pay?    A.  She  paid  over  $700. 

Q.  Paid  over  $700,  and  got  nothing?     A.  Yes. 

Q.  This  is  signed  by  Annie  Sechtano?     A.  Yes,  sir. 

Q.  This  is  another,  from  Mrs.  Joseph  Ingham,  also  a  widow  lady  depend- 
ent upon  her  labor  for  her  support;  conducts  a  small  lodging  house;  joined 
the  Western  Mutual  Benefit  Association  of  America,  Pacific  Coast  depart- 
ment; she  paid  all  assessments  until  the  society  failed  in  March  last;  she 
was  to  receive  $1,000  at  the  end  of  the  four  years,  and  got  nothing?  A. 
She  deprived  herself,  as  she  told  me  personally,  of  the  necessaries  of  life 
to  do  that.  She  paid  in  about  $350 — deprived  herself  of  the  necessaries 
of  life  to  do  that. 

Q.  Is  there  anything  else?  A.  There  is  a  change  of  by-laws;  the  old 
company,  without  any  consultation,  entirely  changed  the  plan. 

Q.  Changed  the  terms  of  the  contract?  A.  Changed  the  terms  of  the 
contract. 

Q.  Made  them  one  sided  against  the  members,  when  they  were  already 
one  sided  in  their  favor?    A.  Yes. 


64 
Mrs.  E.  a.  Ainslie. 

Mr.  Spelling:  Where  do  yoa  reside?     Answer— No.  202  Stockton  Street. 

Q.  Were  you  solicited  to  become  a  member  of  Hie  Western  Mutual  Bene- 
fit Association,  of  San  Francisco?     A.  Yes,  sir. 

Q.  Who  solicited  you  to  join?  A.  Mr.  Riddle,  and  Mrs.  Riddle,  and 
Mrs.  Jones. 

Q.  You  talked  to  Mr.  Brookes  about  it?     A.  Yes,  sir. 

Q.  Where  did  you  see  Mr.  Brookes,  the  President?  A.  In  the  Occi- 
dental Endowment  Association. 

Q.  Did  you  see  him  any  time  in  room  10,  Flood  building?  A.  I  did; 
and  had  a  conversation  with  him. 

Q.  Did  anyone  hand  you  one  of  these  circulars?  A.  Yes;  and  that 
was  sent  to  me  by  mail. 

Q.  Did  the  President  of  the  association,  Mr.  Brookes,  hand  you  one? 
A.  No,  sir;  he  did  not. 

Q.  Did  you  not  see  him  folding  them,  and  sending  them  aw^ay?  A.  He 
was  there  folding  them,  and  so  was  Mrs.  Riddle.  He  said  he  was  going 
into  it,  and  that  it  was  a  good  thing  for  him  to  go  into. 

Q.  Did  you  say  that  he  had  them  printed  ?  A.  It  was  a  mutual  agree- 
ment between  them  all  to  have  them  printed. 

Q:  And  Mr,  Brookes  was  folding  and  sending  them  out?  A.  Mr.  Brookes, 
Mr.  Riddle,  Mrs.  Riddle,  and  Mrs.  Morelli  were  all  there  folding  them  and 
sending  them  out. 

Q.  What  is  your  occupation?     A.  I  am  a  sick  nurse. 

Q.  How  much  money  did  you  pay  into  the  Occidental  Self-Endowment? 
A.  I  paid  in  $600  or  $700.  I  paid  them  $40  after  they  were  seized,  not 
knowing  they  were  seized;  they  took  it. 

Q.  And  kept  it?  A.  They  kept  it.  After  they  were  seized  they  took 
$40  from  me. 

Q.  From  whom  did  you  demand  it?  A.  From  Mr.  Jones  and  Mr. 
Riddle. 

Q.  What  position  did  they  occupy?  A.  Jones  was  Secretary,  Riddle 
was  President. 

Colonel  Tobin:  Are  they  in  the  city  now?  A.  Yes;  Mr.  Riddle  is  there 
now,  and  Mr.  Jones  is  doing  the  work. 

Q.  Were  you  aware  that  the  institution  had  collapsed  at  the  time  that 
you  paid  the  money?     A.  No,  sir;  I  had  no  idea. 

Q.  To  whom  did  you  pay  it  there?  A.  I  paid  it  to  Riddle's  son.  I  went 
in  with  my  book  that  they  gave  me,  and  paid  my  two  assessments. 

Q.  Was  the  concern  at  that  time  in  the  hands  of  the  Receiver?  A.  No; 
but  it  had  been  seized. 

Q.  It  had  been  seized  by  the  Sheriff?  A.  I  was  going  up  the  street  a 
few  days  after,  and  a  lady  inquired  of  me  how  much  money  I  had  lost  in 
the  Occidental.  I  told  her  I  had  got  a  paper  that  day  telling  me  the  con- 
cern was  prospering.  I  told  her  she  was  mistaken.  I  went  down  there; 
the  Sheriff  was  in  there.  I  had  that  paper;  the  "Co-Mutual  Alliance,''  I 
think,  is  the  paper  that  they  published.  It  said  that  it  is  in  a  prosperous 
state.  I  felt  myself  quite  mortified.  1  thought  I  would  soon  get  my 
$2,000.     I  have  any  amount  of  papers.     They  sent  me  one  every  month. 

Q.  Do  you  belong  to  this  Western  Mutual?     A.  No,  sir. 

Q.  Do  you  belong  to  any  endowment  association?  A.  I  belong  to  the 
Fraternal,  and  I  belong  to  the  Pacific  Endowment.  I  am  one  of  the  first 
members  of  the  Pacific  Endowment. 

Mr.  Spelling:   You  never  got  your  coupon  paid?    A.  Oh,  no.     My 


65 

coupon  is  due.  I  have  got  the  coupon  yet.  I  never  got  a  cent  out  of  it. 
I  never  had  a  loan.  After  Riddle,  nobody  ever  got  anything;  before  that 
they  loaned.     He  got  everything  himself 

Q.  Did  you  have  a  conversation  with  those  parties  at  the  time  of  the 
Sheriff's  sale?  A.  I  was  in  there.  They  told  me  everything  would  be  all 
right  J  and  to  keep  quiet. 

Q.  Who  were  to  make  it  all  right  after  the  Sheriff's  sale?  A.  That  is 
more  than  I  could  tell  you. 

Q.  Do  you  know  who  was  there  to  bid  in  those  books?  A.  I  don't  know. 
I  did  not  go  to  the  sale  at  all. 

Q.  Do  you  know  who  gave  up  the  books  and  papers  to  be  levied  on  under 
that  attachment?  A.  I  think  they  were  seized  before. the  new  Judge.  I 
think  they  took  a  list  of  the  members'  names  while  the  Sheriff  was  in  the 
office.  I  was  in  there  part  of  the  time,  and  all  the  clerks  seemed  to  be 
busy;  and  I  had  an  idea  that  they  were  taking  the  members'  names;  and 
they  sent  out  that  way — get  them  into  this  new  one,  and  get  their  money. 
I  told  them  they  had  got  all  I  wanted  out  of  me. 


J.  J.  Schneider, 
Of  San  Rafael. 

Mr.  Spelling:  Do  you  know  anything  about  the  business  of  mutual 
benefit  associations  in  your  town?  Answer — Yes;  I  was  a  member  and 
Club  Manager  of  the  Occidental. 

Q.  Did  you  ever  take  out  a  policy  in  the  Western  Mutual  Benefit  Asso- 
ciation ?  A.  I  never  did ;  but  a  policy  was  given  to  me  by  a  solicitor  who 
came  to  my  place.  I  had  some  communications  by  mail  in  relation 
thereto;  but  later  on  a  solicitor  came,  who  was  kind  enough  to  bring  me 
out  a  policy  with  my  name  in,  so  I  think  it  was  not  quite  right.  I  had 
the  policy  with  the  stipulation  that  I  was  to  assign  any  and  all  of  my  inter- 
est in  the  Occidental. 

Q.  Were  you  required  to  give  up  your  Occidental  papers  before  you  got 
into  the  Western  Mutual?  A.  I  did  not  read  that;  I  had  no  confidence 
in  it;  I  have  it  still  in  my  box. 

Q.  Who  solicited  you?  A.  I  don't  know  who  the  young  man  is.  I  sup- 
posed it  to  be  Jones;  but  he  was  too  young  to  be  Jones. 

Q.  Did  any  one  send  you  a  circular?  A.  I  had  several  previous,  that 
had  come  from  the  main  office.     Here  is  one  from  Riddle. 

Colonel  Tobin:  How  much  did  you  pay  into  the  Occidental  while  you 
were  a  member?  A.  I  think  over  $400.  My  assessment  per  month  was 
$3  80. 

Q.  Did  any  coupon  become  due?  A.  No;  the  first  would  be  due  next 
March. 

Q.  Did  you  ever  receive  anything?    A.  It  collapsed  last  March. 

Q.  It  collapsed  before  the  first  coupon  became  due?     A.  Yes. 

Q.  Do  you  know  of  any  more  in  San  Rafael  who  were  in  the  same  boat 
as  you?  A.  There  were  some  fourteen.  We  started  as  a  club  of  twenty- 
four.  I  was  never  in  the  Western  Mutual.  They  sent  me  circulars.  I 
had  been  long  a  resident,  and  raised  a  large  family,  and  felt  I  could  not 
conscientiously  ask  people  to  enter. 

Q.  Were  those  of  the  working  class?  A.  In  our  club  they  were  not. 
They  were  men  not  possessed  of  capital,  but  the}^  had  some  exceptions. 

Q.  And  who  would  feel  the  loss  of  the  capital  that  they  had  paid  in  ? 
A,  1  suppose  one  half  of  them  would  feel  the  loss. 

5-L 


66 

Q.  Do  you  know  S.  S.  Barstow,  marine  surveyor?    A.  Yes,  sir. 

Q.  Is  he  a  respectable  gentlemen?     A.  Yes,  sir. 

Mr.  Spelling:  I  have  a  statement  from  S.  S.  Barstow.  [Statement 
read.]  A.  That  is  about  why  they  all  paid  in.  The  reason  why  they 
published,  as  the  lady  stated,  a  paper  called  the  "  Co-Mutual  Alliance," 
a  paper  that  gave  a  monetary  statement  every  month.  They  did  it  up  to 
the  end  of  the  last  month.  That  letter  would  be,  without  question, 
indorsed  by  all  the  members  of  the  club. 

Q.  The  letter  that  he  sent?  A.  Yes,  sir;  those  are  the  sentiments  of 
the  club  consisting  of  fourteen  members — there  were  twenty-five  when 
they  started. 

Colonel  Tobin:  There  are  about  two  hundred  letters  of  this  character. 

Witness:  The  association  started  within  two  days  from  the  time  of  this 
coupon,  and  they  had  a  method  that  I  would  like  to  make  a  statement  of 
They  had  a  method;  they  seemed  to  send  fair  communications  to  every 
one  all  along,  until  coupons  like  this  became  due;  the  holder  was  the  first 
one  to  receive  a  letter  that  gave  the  true  financial  status  of  the  company, 
wherein  they  stated  the  financial  status  of  the  company,  and  said  that  he 
can  get  within  ninety  days  a  certain  amount — I  think  about  one  third  of 
what  is  due  him;  and  it  appeared  to  me  that  they  have  been  doing  this 
kind  of  business  all  along,  paying  about  one  third,  and  taking  the  mem- 
ber's receipt  for  the  whole  amount,  and  thereby  published  as  having  paid 
a  certain  coupon  of  $1,000,  whereas  the  fact  is  that  they  paid  one  third 
or  whatever  else  they  could  settle  for.  v 

Q.  It  was  given  here  that  a  lady  was  off'ered  $15  65  if  she  gave  a  receipt 
in  full  for  $500?  A.  I  inferred  that  from  the  character  of  the  communi- 
cation they  sent  me. 

Q.  And  not  only  that,  but  it  was  in  writing  by  the  Secretary  that  was  in 
their  association.  Then  they  would  advertise  this  coupon  paid  to  her  in 
full?  A.  It  must  have  been  the  method  of  their  operations,  because  they 
published  that  paper  up  to  the  last.  I  was  looking  for  one  paper.  I  came 
down  in  order  to  show  the  character  of  their  statements. 

Mr.  Spelling:  They  published  one  in  March,  after  they  were  seized?  A. 
I  think  I  have  one  in  my  possession  after  that  time. 


Robert  Bruce. 

Mr.  Spelling:  Where  do  you  reside?    Answer — Vallejo. 

Q.  What  business  are  you  engaged  in?    A.  Grocery  business  at  present. 

Q.  Are  you  acquainted  with  the  operations  of  the  Western  Mutual  Bene- 
fit Association  and  its  predecessors  in  the  endowment  and  mutual  assess- 
ment? A.  Not  the  Western  Mutual.  I  am  more  or  less  acquainted  with 
its  predecessors,  but  not  much  with  it. 

Q.  What  predecessors  do  you  speak  of?  A.  The  Occidental  and  the 
Pacific  Coast  branch  of  the  Texas — I  don't  know  what  you  call  it.  I  took 
out  a  policy.  It  is  one  of  those  things  that  a  man  will  do  sometimes  that 
he  will  not  do  before  or  after.  I  paid  my  assessments,  and  paid  no  more 
attention  to  it  until  the  Sheriff  was  put  into  possession.  I  never  had  any 
faith  in  it.  I  insured  my  wife  as  well  as  myself.  I  was  in  for  six  years, 
and  this  year  both  our  coupons  would  become  due,  and  I  paid  up  until  the 
time  it  failed — I  think  it  was  March. 

Colonel  Tobin:  How  much  were  you  insured  for?  A.  $5,000,  paid  by 
coupons,  one  every  six  months. 


67 

Q.  $5,000  for  yourself  and  a  like  amount  for  your  wife — $10,000  alto- 
gether?    A.  Yes,  sir. 

Q.  Then  you  would  be  entitled  to  $2,000  for  yourself  and  your  wife? 
A.  Yes,  sir.     I  paid  in  between  $700  and  $800. 

Q.  How  much  did  you  receive?  A.  Nothing.  Never  expected  it.  Was 
not  fooled  about  it. 

Mr.  Spelling:  How  many  people  in  your  town,  giving  a  general  idea, 
were  investing  in  that  company?  A.  I  do  not  know.  There  were  a  great 
number  invested.  Some  got  their  $1,000,  and  got  their  portions  of  it  and 
got  out. 

Q.  The  Club  Managers  got  their  share?     A.  I  don't  know  that. 

Q.  Did  one  of  the  Directors  live  in  your  town?     A.  Yes;  Dean  Harrier. 

Q.  Did  he  get  his  coupon  paid?  A.  He  got  his  coupon  paid,  but 
whether  in  full  or  not  I  do  not  know.  I  know  a  Miss  McNear  that  keeps 
a  small  millinery  shop;  she  got  $600,  and  the  mail  before  that  she  got 
$2,000. 

Q.  How  was  she  able  to  get  any?  A.  Her  coupon  was  long  due.  She 
got  it  last  fall  and  her  coupon  was  six  months  overdue. 

Q.  Was  she  not  about  to  sue  them?     A.  I  don't  know;  I  think  not. 

Q.  What  class  of  people,  as  a  rule,  patronized  that  institution  in  your 
town,  poor  people  or  rich  people?     A.  Poor  people;  fools  in  general. 

Q.  Were  they  not  working  people?  A.  Generally  your  working  men 
has  no  sense,  or  women  either. 

Colonel  ToBTN:  You  won't  find  many  capitalists  going  into  it  ?  A.  Not 
generally;  but  I  don't  blame  them,  either. 

Mr.  Spelling:  Mary  C.  Curran — did  she  sign  a  statement  to  be  put  in 
evidence  here  before  the  Commissioner?     A.  She  did. 

Q.  Is  this  the  statement?     A.  Yes,  sir. 

[Statement  handed  in  in  evidence.] 

Q.  Do  you  know  Mrs.  Gillon?  A.  I  do.  Mrs.  Gillon  is  in  terribly  poor 
circumstances. 

[Mrs.  Gillon's  statement  read.] 

Witness:  I  know  Mrs.  Cobbett,  that  says  she  has  paid  in  $400  into  that 
institution.  She  has  earned  it  on  the  washboard;  she  has  no  other  means 
of  making  a  living  only  washing  and  ironing. 

Q.  Do  you  know  Mrs.  Sarah  Cornell?     A.  I  know  her. 

Q.  What  are  her  circumstances  ?    A.  Her  circumstances  are  very  poor. 

Q.  She  says  she  has  frequently  borrowed  money  to  keep  her  assessments 
paid  up?  A.  The  distress  and  feelings  of  poor  women,  from  paying  into 
the  Occidental,  no  words  can  express  it. 

[Statement  read  of  Jorgen  Healdsburg.] 

Mr.  Spelling:  I  will  say  now  that  the  Commissioner  has  a  list  of  three 
hundred  and  forty-seven  victims  of  these  associations  in  different  parts  of 
the  State,  and  in  different  companies  who  have  written  those  letters  that 
we  have  been  speaking  of,  and  have  sent  their  proofs  of  broken  contracts, 
which  proofs  are  in  evidence.  We  have  a  list  of  names  here — we  will  not 
call  them  all — the  number  is  three  hundred  and  forty-seven.  Those  per- 
sons, I  will  say,  according  to  those  statements  and  the  evidence  contained 
in  their  contracts,  have  paid  from  $200  to  $800  each,  and  most  of  them 
got  nothing  in  return — a  few  of  them  getting  small  loans. 


68 

C.  A.  Sawtelle. 

Question — Where  do  you  reside  ?  What  is  your  occupation?  Answer—* 
Bookseller  and  stationer. 

Q.  Do  you  know  anything  about  the  Western  Mutual  Benefit  Associa- 
tion?    A.  I  know  their  circulars  and  so  forth.     I  read  all  their  circulars; 

Q.  Do  you  know  who  organized  that  and  put  it  on  foot?  A.  It  is  all  in 
the  printed  list.     You  have  that  all,  I  believe. 

Q.  Do  you  know  that  certain  officers  of  the  Occidental  Self-Endowment 
Association  had  considerable  to  do  in  getting  that  scheme  up,  and  putting 
it  on  foot  ?  A.  I  think  the  members  had  more  to  do  with  it  than  the  offi- 
cers. 

Q.  AVere  you  not  in  the  city  after  it  was  organized — shortly  after  ?  A. 
Yes. 

Q.  Did  you  ever  talk  with  the  President  and  Business  Manager  and 
Secretary  of  the  Occidental  in  regard  to  the  organization  of  the  Western 
Mutual  Benefit  Association?  A.  I  talked  with  them  after  it  was  incor- 
porated; yes. 

Q.  Did  they  tell  you  that  they  had  assisted  and  taken  part  in  its  organ-  . 
ization  ?  A.  No;  they  always  claimed  that  those  in  the  circulars  were  the  I 
only  getters-up  of  it. 

Q.  About  what  time,  Mr.  Sawtelle,  did  the  Occidental  quit  business  ?  A. 
You  have  the  dates  there.  I  think  it  was  March  or  April.  I  think  it  was 
April,  or  the  first  of  May. 

Q.  Of  this  year?    A.  Yes,  sir. 

Q.  Were  you  not  down  here  in  conference  with  the  Directors  of  the 
Occidental  about  the  time  that  they  concluded  to  give  it  up?  A.  I  was 
down  at  the  meeting.  I  was  there  at  the  meeting.  I  could  not  tell  you 
what  month  it  was. 

Q.  Do  you  know  the  time  of  the  meeting  of  the  Directors  of  the  Occi- 
dental when  it  was  in  organization?  A.  Do  I  know  the  time?  I  could  not 
tell  this  thing. 

Q.  Don't  you  know,  Mr.  Sawtelle,  as  a  fact,  that  the  dates  of  the  regular 
meetings  were  the  first  Tuesday  in  each  month?  A.  I  do  not  say  that  I 
do;  no. 

Q.  Don't  you  know  that  it  was  at  the  beginning  of  April  that  they  held 
that  meeting?  A.  You  know  when  it  was,  because  I  have  met  you  there. 
You  have  cause  to  remember.  I  cannot  tell  you  the  day.  But  so  far  as 
being  in  conference  with  them,  there  was  nothing  of  it.  I  happened  in 
there  to  see  what  was  going  on. 

Q.  Did  you  not  hand  in  your  written  resignation  at  the  time?  A.  No; 
I  did  not  hand  in  any  resignation.  I  simply  declined  to  accept  any 
appointment  as  Director. 

Q.  They  were  desirous  of  making  you  a  Director?    A.  Yes,  sir. 

Q.  At  that  meeting  did  they  not  pass  a  resolution  to  have  the  association 
carried  through  as  an  insolvent,  unless  they  got  terms?     A.  Yes,  sir. 

Colonel  Tobin:  Were  there  many  members  of  that  association  in  Sacra- 
mento? A.  There  were  about  one  hundred  and  twenty-five  in  Sacra- 
mento; but  there  had  been  a  great  many  more  than  that.  There  had 
probably  been  four  hundred  or  more — in  the  neighborhood  of  four  hundred. 

Q.  Do  you  know  of  any  who  were  paid  their  coupons?  A.  Yes;  a  great 
many  received  the  full  amount  of  their  coupons,  and  a  great  many  others 
received  payments  as  the  Board  saw  that  the  institution  would  pay  or 
could  pay — share  and  share  alike.  A  good  many  got  the  full  amount. 
Then,  when  it  was  figured  out  that  it  could  not  pay  every  dollar,  they  cut 


down  the  amount  to  be  paid,  and  a  good  many  got  their  payments  on  that 
figure. 

Q.  What  class  of  people  were  generally  in  it?  A.  Well,  sir,  there  were 
all  classes;  some  of  our  wealthiest  men,  and  some  poor  people,  so  far  as  it 
goes. 

Q.  Do  you  know  of  any  endowment  association  having  headquarters  in 
Sacramento,  having  regular  offices  and  doing  business?  A.  There  are 
several  that  have  their  agents  there  so  far  as  that  goes. 

Q.  That  have  their  regular  agents  there  ?  Could  you  mention  any  at 
the  present  time?     A.  I  don't  know  as  I  could. 

Q.  How  long  were  you  a  member  of  the  Occidental  ?  A.  I  guess  prob- 
ably seven  years — six  or  seven  years. 

Q.  Did  you  receive  your  coupons  ?     A.  Oh,  no;  I  was  a  nine-year  member. 

Q.  How  much  did  you  pay  into  the  association?  A.  Take  it  altogether 
I  paid  on  three  policies,  the  payments  on  which  was  $700. 

Q.  And  never  got  anything  for  it?     A.  Nothing  at  all. 

Colonel  Tobin  :  What,  in  your  opinion,  was  the  main  cause  of  the  failure  ? 
A.  I  think  the  whole  cause  was  simply  a  few  dissatisfied  parties  who  would 
not  take  their  pro  rata  of  cash;  in  other  words,  that  they  were  not  satisfied 
with  a  smaller  amount  than  their  contract  called  for.  The  agreement  and 
contract  was  to  get  $1,000  or  whatever  the  profits  of  the  association  might 
be,  and  they  all  understood  it  as  $1,000  apiece.  A  year  and  three  or  four 
months  before  it  suspended  they  cut  down  the  payments  to  $1,000,  it  pay- 
ing them  $2  for  every  $1  they  paid  in  on  assessments,  which  I  think  you 
have  sense  enough  to  see  is  a  very  fair  and  square  proposition.  It  was  run 
right  over  a  year  on  that  proposition.  Parties  brought  suit;  no  money 
coming  in  there  was  nothing  to  pay  out. 

Q.  Did  they  not  promise  more  than  they  could  perform?    A.  In  part. 

Q.  Why  did  they  fail  ?  A.  On  account  of  the  carelessness  of  back  man- 
agement. Instead  of  figuring  it  they  sat  down  and  did  not  make  provision 
for  the  future  as  they  ought  to  have  done.  They  should  have  increased 
their  assessments  to  one  every  fifteen  days.     They  did  later  on. 

Q.  Were  you  the  Club  Manager  at  Sacramento?    A.  Yes. 

Q.  And  your  name  was  published  as  a  Director  for  two  months  before 
the  collapse?  A.  Not  quite  two  months.  That  is,  it  was  published  in 
leaflets. 

Q.  Were  you  present  at  the  general  meeting?    A.  Yes. 

Q.  At  that  time  you  were  elected  Director?  A.  I  was  simply  appointed 
Director,  and  declined  to  accept.  A  Director  proposed  me;  it  was  moved 
and  seconded.     I  declined. 

Q.  Were  you  the  Chairman  of  a  committee  last  January  to  report  to  the 
association?     A.  I  could  not  tell  you. 

Q.  As  Chairman  of  the  Finance  Committee?  A.  I  don't  remember;  I 
have  been  on  the  Finance  Committee  three  or  four  times. 

Q.  Did  you  make  an  examination  of  the  books  last  January?  A.  I 
have  made  an  examination  of  the  books,  but  understand,  I  did  not  expert 
the  books.     I  do  not  know  the  date. 

Mr.  Spelling:  Did  you  receive  the  "Co-Mutual?"     A.  Yes. 

Q.  I  see  in  February,  the  month  before  it  failed,  your  name  published 
as  a  Director?  A.  I  did  not  see  it  in  the  paper;  I  know  it  was  published 
in  the  leaflets.  Their  publishing  my  name  as  Director  particularly  did  not 
make  me  so.  They  cannot  make  a  man  a  Director  unless  he  accepts  it; 
whether  my  name  is  published  or  not  does  not  make  me  so;  I  never  was  a 
Director  in  the  association. 

Colonel  Tobin:  Don't  you  think  it  very  necessary  that  all  these  associa- 


70 

tions  should  be  controlled  and  regulated  by  law?  Don't  you  think  they 
should  be  under  the  Insurance  Commissioner  or  some  other  State  officer? 
A.  Yes,  sir;  that  is  my  idea,  and  file  a  report  quarterly  or  semi-annually, 
so  people  can  go  and  know  exactly  what  is  what. 

Q.  You  made  an  examination  last  January  and  reported?  A.  I  did. 
That  is,  it  may  have  been  January  or  February. 

Q.  The  report  was  published  in  the  "AlHance?"  A.  I  think  they  [gen- 
erally published  the  report  in  the  "Alliance." 


J.  Claypole, 
Santa  Rosa. 

Mr.  Spelling:   Did  you  occupy  some  official  position  or  agency?    An-  • 
swer — I  collected  some  for  them,  and  acted  as  agent  for  them. 

Q.  You  were  Club  Manager  for  them?    A.  Yes. 

Q.  How  long?    A.  About  ten  months. 

Q.  How  many  paid  assessments?  A.  Something  between  seventy  and 
one  hundred. 

Q.  As  a  general  thing  what  class  of  people  were  they — merchants  and 
bankers,  or  poor  people  ?  A.  They  were  divided.  Merchants  and  bankers 
and  poor  men  and  poor  women,  and  some  rich  women — all  went  in  for 
speculation. 

Q.  To  what  class  did  the  majority  of  them  belong?  A.  In  Santa  Rosa 
the  rich  class  was  in  a  minority.  The  majority  were  common  laborers.  I 
made  a  contract  that  all  accept  $2  for  $1.  Those  who  did  not  get  $1,000 
last  year,  they  made  a  special  contract  to  take  $2  for  $1. 

Q.  Don't  you  know  that  Mr.  Peck  made  a  special  contract,  and  did  not 
get  anything?  A.  I  know  it;  and  why  did  not  he  get  it?  He  brought 
suit.  I  was  in  Class  A  for  $500.  I  lived  my  coupon  out,  and  the  year 
before  it  was  due  the  company  said  they  could  not  possibly  pay  $3  for  $1, 
and  came  to  me  with  a  written  obligation,  and  asked  me  if  I  could  not 
accept  $2  for  $1.     I  did,  and  I  got  it. 

Mr.  Spelling:  But  you  know  some  that  did  not  get  it?    A.  Yes. 

Q.  And  you  worked  for  the  company?  A.  I  worked  to  sell  coupons  for 
the  company;  I  worked  as  an  agent;  tried  to  get  members  of  the  company, 
and  I  got  many  members.  It  is  a  mutual  concern,  and  the  cause  of  it 
becoming  defunct  is  the  fault  of  the  members  who  have  ceased  to  pay.  I 
made  a  calculation  that  if  every  member  had  paid  his  regular  assessment 
without  drawing,  there  would  have  been  no  need  for  any  payment  of  money 
at  two  to  one;  they  would  have  had  plenty  of  money,  and  gone  on  to-day. 
They  made  a  mistake  when  they  loaned  money.  They  have  $50,000  loaned 
out  they  can  do  nothing  with.  I  borrowed  some  of  that  myself.  My  wife 
was  not  out.  She  borrowed  $100.  She  got  no  thousand,  but  she  got  that 
$100.  I  got,  while  Club  Manager,  10  cents  for  every  assessment  paid — not 
10  cents  on  the  dollar;  it  would  not  pay  me  $15  a  month.  I  want  to  tell  the 
facts  as  I  understand  them.  There  are  a  great  many  ladies  in  that  institu- 
tion; some  of  them  very  poor.  One  of  these  I  told:  "  If  every  member  in 
that  institution,  two  thousand  three  hundred,  will  pay  the  assessments, 
there  is  no  trouble  in  your  getting  your  money."  There  is  not  one  out  of 
five  of  those  who  got  his  $1,000  that  continued  to  pay  assessments;  he 
says:  "  I  am  ahead  of  the  company  now,  and  I  will  quit." 

Colonel  Tobin:  Is  not  that  the  general  rule  in  other  associations?  A. 
That  is  the  general  rule  in  any  association  where  they  go  in  for  speculation. 

Mr.  Spelling:  Suppose  they  all  paid  and  kept  paying,  where  are  they 


71 

to  get  $2  for  $1  ?  A.  They  can  get  it  easily  in  the  profits  of  the  institution. 
If  we  can  work  and  get  new  members  to  pay  us  off,  we  would  get  along. 
We  make  the  profits  if  a  man  pays  and  goes,  and  others  come  in  his  place, 
and  his  endowment  runs  on  three  or  four  years  along. 

Q.  Some  are  bound  to  pay  in  a  lot  of  money  and  lose  it  in  order  for 
others  to  get  their  money  ?     A.  That  is  true  in  all  insurance. 

Q.  Who  was  your  predecessor  as  Club  Manager  there?  A.  Mrs.  Mieger. 
She  got  her  two  for  one  in  the  written  statement.  All  that  got  their  money 
agreed  to  take  their  25  per  cent. 

Q.  Do  you  know  of  anybody  else  getting  their  money  except  you  and . 
Mrs.  Mieger?     A.  I  think  there  were  six  or  seven. 

Q.  Six  or  seven  out  of  one  hundred  and  twenty-five  ?  A.  There  was  not 
one  hundred  and  tvventy-five  there. 

Adjourned  till  next  day. 


J.  J.  Vasconcellos. 

Called. 

Mr.  Spelling:  What  is  your  name  and  place  of  business?  Answer — My 
name  is  J.  J.  Vasconcellos;  my  place  of  business  524  Washington  Street. 

Q.  Have  you  any  experience  as  a  member  of  endowment  and  mutual 
assessment  associations?     A.  Yes;  some. 

Q.  What  association  have  you  been  a  member  of?  A.  I  was  a  member 
of  the  Occidental  Self-Endowment  Association. 

Q.  Any  other?     A.  Not  an  endowment,  I  don't  think. 

Q.  Well,  they  may  not  be  in  that  name,  but  I  mean  any  life  insurance 
company?     A.  I  belong  to  an  association,  policy  payable  at  death. 

Q.  You  were  a  member  of  that  institution  in  January  last?     A.  Yes. 

Q.  Did  you  take  the  "  Co-Mutual  Alliance  "  at  that  time?    A.  Yes. 

Q.  Mr.  Sawtelle  has  stated  that  as  Chairman  of  the  Finance  Committee 
he  made  a  report  in  January.  Do  you  remember  reading  that  report  ? 
A.  I  do. 

Q.  Do  you  recollect  the  substance?  A.  I  could  not  tell  the  substance. 
I  think  the  purport  was  that  it  was  in  a  better  standing  than  it  had  been 
for  years.  I  had  the  paper  that  I  turned  over  to  you.  It  was  in  January 
or  February. 

Q.  How  long  after  before  it  closed?     A.  I  closed  them  out  in  March. 

Colonel  Tobin:  Why  did  you  close  them  out?  A.  I  brought  suit  for  my 
coupon  and  they  would  not  settle  with  me. 

Mr.  Spelling:  Did  that  report  of  the  Finance  Committee  state  that  it 
was  founded  on  an  examination  into  the  affairs  of  the  association  ?  A.  I 
think  it  did. 

Q.  What  time  did  you  square  up  with  them?  A.  Well,  I  think  I 
squared  up  with  them,  sold  them  out,  on  the  eighteenth  of  April. 

Q.  But  you  did  not  get  satisfaction  in  that  sale  ?  A.  I  did  not  get  sat- 
isfaction. 

Q.  You  settled  with  them  since  ?     A.  No,  sir. 

Q.  Do  you  know  anything  about  the  organization  of  the  Western  Mutual 
Benefit  Association?    A.  No,  sir. 

Q.  Don't  you  know  who  organized  it?  A.  If  I  remember  aright,  I  think 
after  I  attached,  I  don't  know  whether  I  am  right  or  not,  but  some  institu- 
tion of  the  like  name  was  started  by  the  officers  after  I  closed  them  out. 
They  started  an  office  in  Room  10,  Flood  building. 

Q.  Do  you  know  anything  about  Jones,  of  the  Occidental,  going  round 


and  buying  up  lapsed  policies?  A.  Yes;  I  know  where  Jones  sent  round 
buying  proxies  for  lapsed  policies. 

Q.  And  getting  powers  of  attorney?    A.  Yes. 

Q.  And  drawing  money  on  them  ?    A.  Drawing  full  money;  yes,  sir. 

Q.  Who  did  that  business,  do  you  know?  A.  I  know  of  one  in  particu- 
lar; his  name,  I  think,  was  P.  D.  Guardmire. 

Q.  Do  you  know  of  an  instance  in  which  he  did  it?  A,  I  know  of  one 
only  that  I  have  evidence  of. 

Q.  With  whom  was  it  transacted?  A.  That  transaction  was  with  W. 
H.  Rvan,  of  Arroyo  Grande. 

Q.  "'In  this  State?    A.  Yes,  sir. 

Q.  Do  you  know  how  much  he  gave  for  that  lapsed  policy  ?  A.  All  I 
have  is  the  statement  of  their  paper,  purporting  to  pay  him  $1,000. 

Q.  How  much  was  paid?  A.  None,  to  him;  he  did  not  receive  a  dollar, 
although  the  paper  stated  he  received  $1,000. 

Q.  Do  you  know  who  reinstated  that  policy  in  that  company,  so  as  to 
put  it  on  the  books  in  the  regular  order  of  payment  ?  A.  I  think  it  was 
Mr.  Riddle.  The  policy  is  signed  by  T.  J.  Brookes,  as  President,  with 
George  C.  Jones,  as  Secretary.  [Policy  here  shown  to  the  Commissioner.] 
That  is  the  coupon  that  they  cut  off'.  I  would  like  to  state  that  that  policy 
was  not  issued  at  that  date — it  was  not  issued  when  it  purports  to  be.  It 
claims  here  that  it  was  issued  in  1884,  but  it  was  not;  that  policy  was  not 
issued  at  that  date. 

Colonel  Tobin:  You  state  that  although  this  policy  here  is  dated  the 
twenty-fifth  day  of  February,  1884,  that  it  was  not  issued  at  that  date.  At 
what  date  was  it  issued?  A.  It  was  issued  some  time  in  1887;  I  think  in 
May.  I  will  state  the  purport  of  this  policy:  Mr.  Ryan  was  insured  in 
two  policies — they  were  having  two  policies,  A  and  B.  A  was  an  endow- 
ment policy;  B  policy  was  a  death  policy.  He  belonged  three  or  four 
months  to  the  institution,  and  when  the  "Chronicle  "  came  out  and  smeared 
it  all  over,  Mr.  Ryan  gave  up.  He  stopped  paying  assessments  and  the 
policy  lapsed.  He  thought  it  good  for  nothing,  and  he  dropped  it,  and 
destroyed  all  the  papers  he  had;  and  when  this  Mr.  Guardmire  went  down 
to  him,  Mr.  Ryan  stated  to  him  that  he  had  no  policies  at  all. 

Q.  Was  Mr.  Guardmire  an  agent?  A.  Yes;  Mr.  Guardmire  purported 
to  be  an  agent,  and  was  getting  powers  of  attorney  with  which  to  make 
collections  on  the  death  of  policy  holders  whose  policies  had  run  out,  and 
he  wanted  Mr.  Ryan's  power  of  attorney — that  had  no  policy — which  he 
could  get  reinstated  himself. 

Q.  Because  he  had  burned  them  ?  A.  He  destroyed  them.  He  had  noth- 
ing to  do  with  them  as  a  member,  except  that  his  name  was  on  the  books 
of  the  company.  They  then  issued  this  in  lieu  of  the  policy  originally 
issued,  because  the  original  policy  was  destroyed. 

Q.  This  coupon  that  you  have  offered  to  us  is  dated  1884?  A.  It  bears 
date  of  the  former  policy. 

Mr.  Spelling:  To  make  it  appear  straight  on  the  books  of  that  institu- 
tion? A.  He  having  no  policy  they  had  to  show  that  the  policy  was  there 
in  order  to  take  the  coupons  up.  Then  they  issued  this,  purporting  to  be 
of  the  same  set  as  the  former  policy. 

Q.  Did  Mr.  Guardmire  draw  the  $1,000?  A.  I  suppose  so,  sir.  He  had 
the  power  of  attorney,  and  the  paper  states  $1,000  was  paid  to  W.  H.  Ryan; 
and  instead  of  that  I  suppose  it  was  paid  to  him  as  his  attorney. 

Q.  You  don't  know  to  whom  it  was  paid?     A.  I  don't. 

Colonel  Tobin:  But  you  know  Mr.  Ryan  did  not  get  it?  A.  No,  sir;  I 
know  positively  Mr.  Ryan  did  not  get  it. 


73 

Q.  Do  you  know,  is  this  a  common  practice  to  have  men  to  buy  up  pol- 
icies of  this  kind  who  are  interested  in  the  cashing  of  coupons?  A.  I 
understood  so — the  buying  of  lapsed  policies. 

Q.  Who  are  engaged  in  this  business?  A.  Generally  the  officers,  with 
subs.,  and  the  heads  of  the  clerks — whoever  they  can  buy  to  do  their  dirty 
work. 

Q.  Did  you  make  them  come  to  time  by  attaching  them,  so  far  as  your 
claim  upon  them  was  concerned'?     A.  No,  sir;  only  so  far  as  I  could. 

Q.  How  much  was  due  you  at  the  time  of  the  attachment?    A.  $1,755. 

Q.  How  much  had  you  paid  in  at  that  time?  A.  Somewhere  between 
$800  and  $900  paid  in. 

Q.  By  attaching  them  how  much  did  you  recover?  A.  I  recovered  three 
of  the  coupons — four  hundred  and  twenty  odd  dollars. 

Q.  You  were  the  first?  A.  No,  sir;  there  was  an  attachment  before 
mine;  that  was  the  reason  why  I  was  not.  I  prided  myself  on  being  the 
first,  but  found  I  was  No.  2. 

Mr.  Spelling;  You  heard  of  a  great  deal  of  that  kind  of  speculation  in 
lapsed  policies  in  that  institution?  A.  Yes;  I  have  no  evidence  in  this 
case.  But  I  have  heard  of  a  good  deal  of  that  kind  of  speculation  being 
carried  on  in  that  institution  since  1887. 

Q.  Did  you  ever  talk  with  the  President,  Mr.  Brookes,  about  it?     A.  Yes. 

Q.  Did  he  ever  admit  to  you  that  it  had  been  to  the  extent  of  $30,000? 
A.  I  cannot  say  that  an  amount  was  stated.  But  he  stated  that  there  was 
crookedness  there,  and  he  would  have  no  crookedness  while  he  had  the 
control  of  it. 

Q.  Do  you  know  what  the  financial  condition  of  that  institution  was  at 
the  time  Sawtelle  made  his  report  as  member  of  the  committee?  A.  Said 
it  was  first  rate. 

Q.  What  was  its  real  state?  A.  Not  a  dollar  except  as  could  be  cleaned 
up  from  its  efiects. 

Q.  About  its  indebtedness — have  you  an  idea  of  the  extent  of  the  indebt- 
edness as  it  appeared  from  their  subsequent  statements?  A.  No;  only  as 
they  came  out  after  I  made  the  attachment. 

Q.  Then  what  did  it  say  about  it  ?  A.  They  claimed  then  they  were 
$100,000  behind;  $100,000  more  behind  than  they  had  money  for. 

Q.  Are  any  of  the  gentlemen  who  were  prominent  in  the  Occidental 
connected  with  these  associations  at  the  present  time?  A.  Not  to  my 
knowledge  except  Mr.  Riddle.  I  think  Mr.  Riddle  still  carries  on  an 
institution,  one  that  has  sprung  out  from  that.  He  was  then  the  Vice- 
President  and  Manager  of  the  Occidental. 

Q.  Do  you  know  what  association  he  is  connected  with  at  the  present 
time?    A.  I  do  not. 

Q.  Do  you  know  of  any  other  except  Mr.  Riddle?  A.  Mr.  Riddle  and 
Mr.  Jones  were  the  only  ones  that  I  know  of.  They  went  out  from  the 
Occidental  rooms  and  started  this  other  institution  across  the  way  that  I 
don't  know  the  name  of. 

Q.  If  the  books  were  properly  kept,  the  Directors  and  officers  were 
bound  to  have  known  the  liabilities  at  the  time  this  report  was  made  up 
by  the  Financial  Committee,  should  they  not?  A.  Should  have  known; 
yes,  sir. 

Q.  Was  that  report  sent  to  the  members  generally?  Published  in  the 
"  Co-Mutual  Alliance ?  "     A.  I  think  it  was,  sir;  the  purported  report. 

Q.  Is  not  that  where  you  saw  it?     A.  Yes,  sir. 


!rs.  Addie  L.  Miller. 

Called. 

Mr.  Spelling:  What  is  your  name?    Answer — Addie  L.  Miller. 

Q.  Where  do  you  reside?     A.  In  Cloverdale,  Sonoma  County. 

Q.  Have  you  had  any  experience  as  a  member  of  the  Self-Endowment 
Association?    A.  I  have. 

Q.  What  is  the  extent  of  your  dealing  with  that  association?  What 
association  was  it  in  the  first  place?     A.  It  was  connected  with  the  Texas. 

Q.  Was  it  the  Mutual  Self-Endowment  of  America?  A.  I  think  so.  I 
have  all  the  papers. 

Q.  Was  it  the  Occidental  ?     A.  It  is  the  Occidental  now. 

Q.  How  much  money  did  you  pay  to  it?  A.  I  could  not  give  you  the 
exact  figures,  but  it  was  in  the  neighborhood  of  $500. 

Q.  Did  you  ever  get  anything  in  return?  A.  No;  only  drew  out  what 
they  called  a  loan  of  $100;  that  was  three  years  ago,  I  think. 

Q.  How  much  did  they  promise  you?  A.  After  two  years,  I  think  it 
was,  we  were  to  receive  $100  every  nine  months — I  think  somewhere  in 
that  neighborhood. 

Q.  Do  you  know  how  much  the  amount  of  your  policy  was?    A.  $5,000. 

Q.  How  much  were  you  to  receive  as  a  coupon  in  that  policy?    A.  $1,000. 

Q.  How  much  did  you  receive  ?    A.  $100. 

Q.  Did  you  have  any  trouble,  Mrs.  Miller,  in  getting  the  money  to  pay 
those  assessments;  and  if  so,  tell  what  it  was ?  A.  We  did  have  very  much 
trouble.  In  the  commencement  of  this  business  with  this  institution  my 
husband  w^as  able  to  labor,  and  had  good  work  in  Cloverdale.  In  two  to 
three  years  after  the  time  the  company  run  out  his  business  was  ruined 
there,  and  we  had  to  seek  other  business.  Business  run  down.  We  went 
to  Mr.  Shaw,  the  banker  there,  and  he  assisted  us  to  pay  our  assessments. 
But  the  last  year  (we  were  paying  $4  20  every  eighteen  or  twenty  days) 
we  had  to  pay  $8  40.  The  assessments  were  doubled.  We  were  not,  under 
the  circumstances,  able  to  pay  without  assistance.  Mr.  Shaw  assisted  us, 
and  to  secure  him  we  mortgaged  our  home.     We  have  lost  our  home. 

Colonel  Tobin:  You  have  lost  your  home  through  it?  A.  In  part. 
There  is  a  little  mortgage  beside  it.  If  we  had  drawn  our  $1,000  it  would 
have  straightened  everything. 

Q.  Is  your  husband  a  well  man  now,  able  to  work,  or  is  he  an  invalid? 
A.  He  is  not  altogether  an  invalid,  but  he  is  getting  on  in  years.  He  is 
sixty-eight  years  old. 

Q.  Are  there  many  in  Cloverdale  or  around  there  who  have  invested 
money  in  this  institution  ?     A.  A  good  many. 

Q.  What  is  their  condition?  A.  Some  of  them  are  working  people 
depending  on  their  labor;  others  are  in  better  circumstances,  able  to  sur- 
vive it. 

Q.  Can  3^ou  tell  us  the  reason  they  put  so  much  confidence  in  the  Occi- 
dental ?  A.  I  suppose  it  was  the  flattering  words  of  Riddle  and  wife,  who 
had  visited  there,  went  from  place  to  place  to  procure  new  members,  sent 
out  their  circulars,  and  every  month  came  a  paper  telling  the  working  order 
of  the  company. 

Q.  Did  they  not  place  special  confidence  in  the  financial  standing  of 
some  of  the  Directors?  A.  I  don't  know.  It  was  supported  by  good 
Directors.     We  did,  of  course. 

Q.  Did  you  know  some  of  the  Directors?  A.  I  am  not  acquainted  with 
any  of  them,  except  Mr.  Riddle  and  wife. 

Q.  Do  you  know  of  other  Directors,  except  Riddle  and  wife,  who  reside 


75 

in  Sonoma  County?  A.  I  don't  know  by  personal  acquaintance.  There 
is  one  at  Santa  Rosa;  he  is  a  banker  there. 

Q.  What  is  his  name?     A.  I  cannot  call  it  to  mind  now. 

Q.  I  have  them  here  in  the  "  Co  Mutual  Alliance;"  did  you  receive  that? 
A.  We  received  it  most  of  the  time;  sometimes  we  missed  copies.  I  think 
I  have  still  the  last  one  at  home.  I  have  a  good  many  for  five  years.  We 
paid  for  it  also. 

Q.  Do  you  know  the  names  of  these  Directors?  A.  They  have  changed 
Directors  different  times  since  we  have  been  members. 

Colonel  Tobin:  Have  you  been  in  any  other  endowment  association? 
A.  No;  not  in  this  State. 

Q.  Were  you  invited  to  become  a  member  of  this  Western  Mutual  Ben- 
efit Association,  that  succeeded  the  Occidental?  A.  There  was  some 
paper  sent,  but  I  took  no  notice  of  it.  I  said:  "  We  don't  want  it."  I  felt 
very  discouraged  and  disheartened — disgusted  I  might  say — with  such  an 
institution  as  we  had  been  supporting. 

Q.  I  understood  the  paper  came  from  the  same  source  as  the  Occidental  ? 
A.  Yes;  or  they  would  not  have  sent  it.  I  learned  from  Mr.  Miller  before 
he  left  home,  that  he  had  been  speaking  to  one  of  the  members,  and  they 
told  him  to  get  his  money  back  he  must  join  the  new  association.  I  think 
the  letter  was  from  Riddle. 

Q.  Are  any  other  persons  here  from  Cloverdale  who  are  interested  in  it? 
A.  Not  that  I  have  any  knowledge.  I  am  glad  to  give  evidence  because 
we  have  suffered  very  much. 

[Mr.  Spelling  read  specific  complaint  by  General  Jo  Hamilton.] 


William  Cruse. 

Called. 

Mr.  Spelling:  Where  do  you  reside?    Answer — In  the  city. 

Q.  Have  you  had  any  experience  as  a  member  of  mutual  assessment  or 
endowment  associations?     A.  Yes,  sir. 

Q.  What  ones  ?    A.  Occidental  Self-Endowment. 

Q.  Have  you  not  been  a  member  of  some  other?     A.  No,  sir. 

Q.  How  much  did  you  lose  in  the  Occidental?  A.  Well,  I  never  reck- 
oned up  the  full  amount,  but  I  got  the  receipts  here.  I  used  to  pay  $5, 
when  I  joined  it  first,  every  twenty  days. 

Q.  Did  they  double  your  assessment?  A.  Then  I  used  to  pay  $10  every 
twenty  days. 

Q.  Did  you  ever  get  anything  back?    A.  Not  a  cent. 

Q.  Can  you  give  an  estimate  of  what  you  paid  in?  A.  I  think  close 
upon  $400. 

Q.  Are  there  any  special  circumstances  connected  with  it  that  you 
would  wish  to  relate?  A.  I  don't  know  of  anything,  but  I  don't  think 
these  things  are  of  much  account  for  any  one  to  risk  his  hard  won  earn- 
ings in.  I  don't  see  any  security  either  for  a  man  to  get  his  money  on. 
They  are  the  same  parties  now  in  the  Flood  building  that  were  in  the 
Phelan. 

Colonel  Tobin:  You  never  received  anything?    A.  Not  a  dollar. 

Q.  Did  one  of  your  coupons  become  due  before  they  failed  ?  A.  It  would 
be  the  next  month.  I  took  a  policy  of  $5,000,  and  I  was  to  receive  $1,000 
every  four  years.  The  first  endowment  was  $100  the  first  year;  then  about 
nine  months  I  would  receive  $100,  and  so  on  till  the  four  years  would 
expire — I  would  have  my  $1,000  drawn. 


76 


Q.  Did  yon  get  $100?     A.  Not  at  all.     I  never  got  $1. 

[Mr.  Spelling  read  written  testimony  of  John  Flood,  Los  Angeles.] 


C.  N.  Jenkins. 

Called. 

Colonel  Tobin:  What  is  your  name,  Mr.  Jenkins?  Answer — C.  N. 
Jenkins. 

Q.  Residence  ?     A.  Marysville. 

Mr.  Spelling:  Have  you  been  acquainted  somewhat  with  the  affairs  of 
life  endowment  associations  in  your  city?    A.  I  have. 

Q.  What  self-endowment  associations  have  been  doing  business  in 
Marysville?  A.  This  one  that  started  there, called  the  Texas  Self-Endow- 
ment Association,  I  suppose,  is  about  the  one  that  you  have  reference  to. 

Q.  You  can  mention  those  that  have  done  business  there  ?  A.  I  know 
that  that  has  done  more  business  than  any  of  the  others;  half  a  dozen 
times  more  than  any  of  the  others. 

Q.  To  what  extent  has  your  association  been  doing  business  in  Marys- 
ville? A.  The  Occidental  was  quite  extensively  circulated  in  Marysville. 
They  had  an  agent  there  that  labored  and  got  a  great  many  connected 
with  it. 

Q.  Were  there  fifty  or  sixty?  A.  I  should  say  as  many  as  fifty — per- 
haps more.     I  know  there  were  a  good  many. 

Q.  Some  women,  were  there  not?    A.  Yes. 

Q.  Do  you  know  of  any  cases  of  special  hardship  in  connection  with  it? 
A.  I  don't  know,  I  may  say,  but  one  case  in  our  neighborhood,  and  that 
has  really  been  a  hardship.  It  is  an  old  Irishman,  who  depended  on  what- 
ever a  man  told  him  to  be  so,  and  had  hard  work  to  get  along,  and  had 
mortgaged  his  place  to  pay  assessments.  I  paid  assessments — two  or  three 
assessments — rather  than  let  him  lose  his  place;  he  is  going  to  lose  it  now. 
He  has  mortgaged  it  to  a  gentleman  there  to  get  money — $600 — and  now 
the  mortgage  has  run  out;  he  is  Mr.  Patrick  McCabe.  He  came  to  my 
place  yesterday,  and  he  says:  "I  can  tell  you  nothing  more  than  I  know; 
you  all  know  about  my  circumstances."  I  have  seen  him  every  week  for 
the  last  ten  or  fifteen  years.  His  wife  is  also  sick  abed — not  able  to  do 
anything. 

Q.  So  he  had  to  pay  assessments  on  both  and  got  nothing  in  return,  and 
they  were  payable?     A.  Were  payable,  and  he  got  nothing  in  return. 

Q.  How  much  had  he  paid  in?  A.  I  don't  know.  The  last  time  I  was 
talking  to  him  it  amounted  to  about  $700;  and  what  he  has  paid  in  since 
I  don't  know. 

Q.  How  much  have  you  paid  in,  yourself,  Mr.  Jenkins — into  the  Occi- 
dental? A.  I  don't  know.  I  figured  it  up,  but  know  I  got  about  even  in 
it.     I  got  my  first  coupon. 

Q.  You  demanded  your  rights  of  them?     A.  Yes. 

Colonel  Tobin:  I  want  to  ask  your  opinion:  You  are  a  representative  in 
one  of  the  fraternal  organizations,  are  you  not?  A.  I  am  Grand  Master 
of  the  State  of  California  in  the  Grand  Lodge  of  Odd  Fellows. 

Q.  I  ask  your  opinion  with  regard  to  associations  such  as  the  Occidental. 
Do  you  consider  it  to  be  a  cooperative  association?  A.  I  can  hardly  see 
how  it  can  be.  I  never  should  have  gone  into  it  myself  if  it  had  not  been 
for  the — I  was  not  solicited  by  the  agent  in  Marysville;  it  was  a  gentleman 
who  had  the  handling  of  it  on  the  start — came  here  from  the  city — his 
name  you  know,  Mr.  Spelling — to  run  this  thing  in  the  first  place. 

Mr.  Spelling:  S.  H.  Ward. 


PORTION  OF  INQUIRY  RELATING  TO  SOURCES  AND  SUFFI- 
CIENCY OF  REVENUE  OF  ENDOWMENT  SOCIETIES. 


E.  H.  Bacon. 

Called. 

Colonel  Tobin:  What  is  your  name?     Answer — E.  H.  Bacon. 

Q.  You  are  the  editor  of  the  "  Pacific  Coast  Review?"     A.  Yes. 

Mr.  Spelling:  Will  you  briefly  give  the  history  of  those  associations 
which  succeeded  each  other  and  finally  culminated  in  the  Western  Mutual 
Benefit  Association — the  one  which  we  are  now  investigating?  A.  The 
Western  Mutual  I  don't  know  anything  about.  The  first  association  of 
that  kind  established  in  the  world  was  in  Texas — at  Long  View,  Texas — 
the  Mutual  Self-Endowment  and  Benefit  Association  of  America;  office  at 
Long  View,  Texas.  Then  they  established  a  branch  in  San  Francisco  at 
7  Powell  Street,  with  a  Mr.  Russell  in  charge  of  it.  This  was  in  1877. 
They  all  failed.  It  was  the  Pacific  Coast  branch  of  the  Mutual  Self- 
Endowment  of  this  same  association;  and  about  six  months  before  the 
coupons  began  to  mature  in  this  Texas  association  it  failed.  This  other 
branch  established  a  second  organization,  and  very  soon  after  its  coupons 
began  to  mature  it  also  failed ;  and  then  out  of  it  had  grown  two  or  three 
associations,  but  the  real  successor  was  the  Occidental.  There  were  three 
further  associations  which  sprung  out  of  this  Pacific  Coast  branch,  but 
they  also  failed.  The  principal  one  was  the  Occidental,  because  it  took  up 
the  coupons  of  the  Texas  branch  and  assumed  obligation  for  them;  and 
as  soon  as  those  coupons  began  to  mature,  then  the  Occidental  became 
embarrassed,  and  the  officers  that  were  in  charge  of  it  abandoned  it  or  dis- 
posed of  it  in  some  way  to  the  officers  of  the  Santa  Rosa  association.  The 
two  associations  were  amalgamated;  and  as  there  were  considerable  new 
loans,  in  that  way  a  collapse  was  temporarily  avoided;  but  when  the  cou- 
pons began  to  become  due  the  company  failed. 

Q.  What  company  was  it?  A.  The  Occidental.  That  has  been  the  his- 
tory of  all  endowment  associations,  and  in  their  nature  and  plan  they 
must  fail  as  soon  as  the  first  coupon  begins  to  mature. 

Q.  Do  you  know  what  membership  the  Pacific  Coast  branch  of  this  con- 
cern had  on  this  coast?  A.  I  examined  the  books;  they  had  nearly  all 
poor  people — laboring  people;  40  per  cent  of  them  were  servant  girls. 

Colonel  Tobin:  As  far  as  you  know,  Mr.  Bacon,  is  it  not  the  fact  that 
the  largest  percentage  of  those  in  this  association  were  women  ?  A.  I  can't 
tell.     We  have  complaints  from  both  men  and  women. 

Mr.  Spelling:  Have  you  an  idea  of  how  many  people  suffered  loss  on 
account  of  the  operations  of  the  Pacific  Coast  department  of  the  Texas 
company — you  have  had  an  opportunity  to  ascertain  that?  A.  I  should 
say  about  one  thousand  one  hundred. 

Q.  And  the  Occidental  succeeded  that,  and  got  up  its  membership  from 
that  company,  and  got  new  members — brought  in  fresh  blood  ?    A.  Yes. 

Q.  How  long  did  the  Occidental  run?  A.  Dating  from  the  time  of  the 
organization  of  the  Pacific  Coast  branch  till  when  the  obligations  first 
matured,  I  should  say  that  it  ran  about  five  years — perhaps  less  than  that. 


78 

Q.  Do  you  know  what  was  the  maximum  membership  of  the  Occidental? 
A.  No,  I  don't  know  anything  about  it. 

Q.  You  don't  know  anything  about  the  extent  of  losses  to  members  in 
the  Occidental?  A.  Nothing  more  than  that  we  had  complaints  from 
persons  who  lost  from  $200  to  $300. 

Q.  Do  you  know  what  its  obligations  were  at  the  time  it  failed?  A.  I 
did  know  that,  but  I  forgot  it. 

Q.  Was  it  not  $178,000,  matured  coupons?  A.  I  don't  think  so  much 
as  that. 

Q.  Was  it  not  $178,000,  to  mature  in  1879?  A.  I  can  readily  believe 
it  was  a  much  larger  sum  than  that. 

Q.  And  as  much  more  for  two  or  three  subsequent  years?  A.  No;  it 
would  not  be  so  much  more. 

Colonel  Tobin:  Give  a  rough  estimate.  What  was  directly  due  at  the 
time?  A.  My  impression  is  that  it  was  reported  to  be  about  $65,000,  and 
that,  of  course,  does  not  represent  those  whose  claims  were  about  to  mature. 
There  was  $60,000  or  $70,000  already  due;  it  was  a  large  sum. 

Mr.  Spelling:  I  asked  you  yesterday  evening  to  give  an  estimate  of  the 
future  liabilities  of  the  Occidental  at  the  time  of  its  collapse?  A.  That 
would  depend  upon  the  age  of  the  membership. 

Q.  Do  you  remember  the  amount  that  would  fall  due  in  1889,  according 
to  their  own  circular  that  Riddle  sent  out?  A.  I  don't  remember.  They 
did  print  some  figures  of  what  they  owed. 

Q.  I  have  a  circular  which  shows  $178,000  to  fall  due  in  1889,  and  a  still 
greater  sum  in  1888. 

Colonel  Tobln:  Mr.  Bacon,  on  yesterday  you  gave  us  some  account  of  the 
successive  metamorphoses  of  the  Texas  concern.  Do  you  remember  the 
year  in  which  the  first  one  of  these  associations,  the  Texas  concern,  started 
here?     A.  Started  in  Texas,  I  think  in  1882  or  1883. 

Q.  When  was  it  started  here?     A.  In  1883. 

Q.  Was  that  the  forerunner  of  the  different  endowment  associations  in 
this  State?  A.  That  was  the  forerunner;  brought  here  by  a  man  named 
Russell,  from  Texas — Russell  and  J.  H.  Ward.     He  was  a  bad  egg,  too. 

Q.  This  original  association  then  underwent  four  or  five  transformations  ? 
A.  The  original  association  underwent  no  transformation.  It  established 
branches  in  Kansas  and  California,  and  it  had  a  great  long  list  of  spurious 
indorsements  of  leading  men. 

Q.  Is  it  not  the  habit  of  associations  of  this  character  to  publish  fictitious 
names  as  references?  A.  It  is.  That  I  have  found  out  from  my  own  cor- 
respondence. 

Q.  These  associations  are  in  the  habit  of  publishing  the  names  of  per- 
sons as  references  that  they  have  no  permission  to  use  ?  A.  No  permission 
whatever. 

Q.  Could  you  give  an  instance  of  that  character  ?  A.  Senator  Stanford's 
name  was  used  by  an  association  in  this  city,  and  I  received  a  letter  from 
him,  in  his  own  handwriting,  stating  they  were  not  authorized  to  use  his 
name,  although  it  was  stated  that  they  had  received  permission  from  him 
and  others. 

Colonel  Tobin:  I  woiild  like  to  call  attention  to  two  names  in  the  pro- 
spectus of  one  of  these  associations — Governor  George  C.  Perkins  and  Mr. 
Henry  M.  Black.  I  called  upon  both  of  these  gentlemen  myself  and  asked 
them  whether  they  had  given  permission  for  the  use  of  their  names,  and 
they  both  denied  having  done  so.  Mr.  Black  called  upon  Mr.  Oakley,  who 
is  the  President  of  the  association,  with  me,  and  demanded  that  his  name 


79 

be  removed  from  that  list  of  references.  I  only  called  upon  two,  and  I 
found  just  as  I  stated. 

Q.  You  have  had  some  experience  in  the  same  line,  in  other  names 
besides  Mr.  Stanford's?  A.  That  is  the  only  one  I  recollect  just  now.  I 
received  letters  from  various  prominent  business  men  denying  having 
given  permission  to  use  their  names  in  connection  with  the  association. 
The  name  of  Governor  Ireton  of  Texas  was  also  used,  especially  by  the 
Texas  association. 

Q.  Now,  from  your  observation,  do  you  find  that  the  same  men  con- 
nected with  these  endowment  associations,  after  one  has  collapsed  become 
the  founders  of  a  new  organization?  A.  Yes.  They  are  identified  with 
these  successive  ones.  They  are  professional  organizers  of  these  associa- 
tions. 

Q.  There  are  some  connected  with  the  organizations  at  present  doing 
business  that  did  belong  to  old  defunct  associations?  A.  Yes;  several  of 
them.  I  don't  remember  any  names  now  except  the  Russells,  who  were 
the  professional  organizers  that  I  spoke  of.  Ward  was  connected  with  two 
or  three;  I  don't  know  where  he  is — he  has  a  citation  from  the  States  Court. 
The  man  who  originally  established  the  Bankers'  Relief  Association  of  San 
Francisco  was  a  professional  organizer.  He  established  one  in  Portland 
under  the  same  name  and  sold  out  for  $4,000.  It  has  since  failed,  and  he 
is  not  now  connected  with  the  San  Francisco  association.  Probably  he 
sold  that  out  also,  for  he  admitted  that  is  his  business. 

Q.  What  is  his  name?  A.  I  don't  recollect  it  now.  I  have  it  at  my 
office. 

Mr.  Spelling:  Who  organized  the  Bankers'  Mutual  Relief  organization? 
A.  They  have  a  new  lot  of  men  in  there  now.  I  cannot  recall  his  name. 
R.  P.  Thomas  was  President  of  the  association  at  the  time  it  was  first 
organized  here,  and  the  Secretary  at  that  time  was  the  real  organizer,  and 
is  the  party  who  I  am  referring  to. 

Colonel  Tobin:  Then  of  those  who  originally  organized  these  endow- 
ment associations  you  know  of  only  two  or  three  connected  with  the  pres- 
ent associations?  A.  That  is  all,  for  the  reason  that  some  twenty-five  of 
them  have  failed,  and  they  don't  continue  to  be  in  business  at  the  old 
stand. 

Q.  What  is  the  average  length  of  life  of  these  associations?  A.  About 
one  year  after  the  first  coupons  have  matured.  None  of  these  associations 
have  survived  six  years.  Of  the  endowment  associations  not  one  of  them 
has  survived  six  years. 

Mr.  Spelling:  What  do  they  do  with  the  first  batch  of  coupons?  Do 
they  pay  them,  or  stave  them  off?     A.  They  are  supposed  to  pay  them. 

Q.  Don't  they  compromise,  or  stave  them  off?  A.  That  depends  upon 
what  you  call  the  first  coupons.  The  first  coupons  are  those  that  mature 
in  the  specified  fraction  of  a  man's  life  expectation. 

Q.  Don't  they  reap  the  richest  harvest  about  the  year  when  they  pay  off 
a  few  coupons,  and  get  the  leverage  of  that  advertising?  A.  That  gen- 
erally occurs  at  the  expiration  of  the  fourth  year,  and  then  the  first  cou- 
pons gather  up,  and  then  they  are  not  able  to  survive  the  second  year's 
coupons. 

Q.  Who  generally  receive  the  first  year's  coupons?  A.  The  oldest  man 
or  woman,  and  not  the  oldest  member.  The  life  expectation  of  young 
people  is  a  great  deal  more  than  that  of  the  older  people,  and  their  coupons 
fall  due  in  an  agreed  upon  fraction  of  the  life  expectation,  which  leaves,  I 
think,  one  fifth. 


80 

Q.  Is  it  not  the  fact  that  the  professional  organizers  generally  manage 
to  have  the  first  coupons  ?     A.  Yes. 

Q.  How  do  they  manage  then  in  case  they  were  young  men?  A.  That 
I  cannot  tell  you. 

Q.  Would  it  not  be  by  getting  hold  of  or  procuring  old  men,  and  by  get- 
ting their  lives  on  the  books,  and  by  dummies?  A.  Very  easily  done,  and 
it  would  almost  defy  detection;  or  take  a  fictitious  name  and  pay  the  fees 
on  it  and  hold  the  coupons  themselves  and  the  certificate  of  membership, 

Q.  Now,  with  regard  to  age,  I  would  like  to  ask  you,  Mr.  Bacon,  since 
you  have  had  great  experience  in  these  matters:  Where  an  association 
issues  only  endowment  policies  to  the  living,  and  has  no  death  policy, 
why  would  it  not  do  to  have  intervals  of  years  established  without  any 
regard  to  the  member's  age  on  entering;  for  instance  in  some  of  these 
organizations  they  have  maturity  tables,  notwithstanding  the  fact  that  they 
issue  only  endowment  policies.  No  policies  paying  anything  in  case  of 
death  except  the  next  maturing  coupon,  now  how  can  the  question  of  age 
affect  the  individual  in  that  case  ?  A.  It  is  not  involved  at  all,  and  it 
would  be  considerably  easier  if  it  were  ignored  entirely. 

Q.  Why  is  it,  then,  that  they  have  this  maturity  table  and  discriminate 
between  different  ages?    A.  Well,  I  could  not  tell. 

Q.  I  have  been  trying  myself,  and  the  only  reason  I  can  imagine  it  is 
done  is  to  give  them  an  appearance  of  doing  business  on  the  life  insurance 
plan?     A.  Yes;  that  is  all. 

Q.  In  other  words,  to  give  members  a  belief  that  they  are  doing  busi- 
ness on  an  insurance  basis?  A.  And  concealing  the  fact  that  it  is  merely 
a  gamble;  certainly  it  is  not  an  insurance. 

Q.  You  stated  that  none  of  these  organizations  have  lasted  more  than  five 
years.  Could  you  give  us  an  idea  of  the  average  age  of  these  associations 
on  the  coast?     A.  None  of  them  have  survived  six  years. 

Q.  What  is  the  average  age  ?  A.  There  is  no  reason  why  every  one  of 
them  shall  not  survive  six  years,  as  that  is  the  time  when  the  coupons 
mature. 

Q.  What  is  the  usual  period  when  the  coupons  mature  ?  A.  At  the  expi- 
ration of  the  fourth  year.  That  represents  the  agreed  upon  fraction  of  the 
life  expectation  of  the  oldest  members. 

Q.  What  do  you  consider  would  be  a  safe  monthly  assessment  for  $1,000, 
due  and  payable  at  the  end  of  four  years,  with  monthly  assessments  ?  A. 
That  depends  upon  the  increase  of  membership  entirely.  If  they  increase 
fifty  a  month,  they  could  probably  pay  the  first  assessment  coupons  for 
about  75  cents  a  month  or  less. 

Q.  Some  old  line  insurance  companies  have  the  endowment  plan  pay- 
able at  certain  intervals  ?     A.  Nothing  like  this. 

Q.  I  want  you  to  explain  the  difference  between  the  plan  of  the  old  line 
insurance  and  the  modern  endowment  ?  A.  The  old  line  system  is  a  defi- 
nite contract  to  pay  a  definite  sum,  and  the  assessment  system  is  a  con- 
tract to  pay  pro  rata  of  the  proceeds  of  the  assessment.  That  represents 
in  a  nutshell  the  difference  between  the  two.  Now,  do  you  want  to  know 
the  difference  between  the  two  plans  of  endowment  insurance  and  the  old 
line  system?  Every  contract  of  endowment  insurance  can  be  computed, 
because  it  is  based  on  the  average  life  expectation  and  the  compound 
interest  earnings  of  advance  premiums.  The  assessment  endowment  plan 
has  no  basis  on  the  life  expectation  nor  upon  the  interest  earnings  of  money, 
but  it  is  an  agreement  to  pay  a  certain  sum  or  a  proportion  of  a  certain 
sum  of  money  to  old  people,  at  the  expense  of  the  young  people.  It 
depends  for  its  success  upon  lapses,  and  as  it  holds  out  inducements  not 


81 

to  lapse,  it  cuts  out  the  very  foundation  upon  which  it  has  any  hope  of 
success.     I  think  that  about  covers  the  ground. 

Q.  Do  you  think  that  an  association  that  does  not  pubHsh  the  full 
details  of  the  receipts  and  disbursements  in  every  fund  a  cooperative 
association  in  the  true  sense  of  the  word  ?  A.  I  should  say  not.  I  should 
say  it  was  crooked. 

Q.  As  to  your  experience,  do  you  know  whether  these  endowment  asso- 
ciations publish  reports  and  exhibit  them,  giving  details  of  what  they  do 
with  the  expense  fund?    A.  None  of  them  have  ever  done  so. 

Q.  What  is  generally  done  with  the  expense  fund?  A.  Well,  it  is 
pocketed  by  the  agents  and  officers;  and,  moreover,  without  any  exception, 
they  divert  a  portion  of  the  ordinary  receipts  or  assessments  for  expenses; 
in  other  words,  the  expenses  of  these  associations  are  not  limited  to  the 
dues  from  fees. 

Q.  Do  not  some  of  them  alienate  a  percentage  even  of  the  assessments 
intended  for  the  reserve  fund  ?    A.  Yes. 

Q.  And  that  reserve  fund  can  be  used  in  case  of  emergency?  A. 
They  take  good  care  that  the  emergency  never  arises,  for  they  say,  as  a 
rule,  that  this  reserve  fund  cannot  be  touched,  unless  the  death  rate  is  in 
excess  of  the  American  table  of  mortality  experience,  and  that  is  not 
likely  to  ever  occur.  So  that  it  is  a  fictitious  reserve  fund,  and  a  temptation 
to  the  cupidity  of  the  managers.  It  does  not  add  one  cent  to  the  security 
of  the  insurance. 

Q.  What  class  of  men  are  generally  engaged  in  the  active  work  of  these 
organizations?  A.  Well,  they  are  adventurers;  men  who  live  by  their 
wits;  men  who  have  failed  in  every  legitimate  undertaking. 

Q.  Are  there. many  insurance  men  among  them?     A.  Very  few. 

Q.  What  class  of  people  are  generally  taken  in  by  the  agents  of  those 
concerns?     A.  The  laboring  classes — men  and  women. 

Q.  Are  women  to  a  large  extent  ?  A.  Women  to  a  large  extent.  I  have 
received  letters  from  numbers  of  women  who  paid  out  hundreds  of  dollars 
and  received  nothing.  As  I  stated  already,  I  examined  the  books  as  an 
expert.  They  did  not  know  my  business;  and  I  carefully  noted  that  out 
of  one  thousand  three  hundred  odd  members,  over  five  hundred  were  women 
and  girls — chambermaids,  milliners'  assistants,  and  house  servants  gener- 
ally. And  of  the  eight  hundred  men,  a  large  majority  of  them  were  labor- 
ers, or  belonging  to  the  laboring  classes. 

Q.  A  gentleman  gave  me  testimony  here  two  or  three  days  ago,  that  he 
was  a  witness  in  one  of  our  factories,  where  a  lady  canvasser  succeeded  in 
getting  twelve  factory  girls  into  one  of  these  endowment  associations  ?  A. 
It  is  sheer  robbery,  as  well  as  practically  impossible  for  them  to  meet  their 
obligations. 

Q.  You  consider  that  they  are  working  on  an  unsound  financial  basis  ? 
A.  On  an  unsound  financial  basis. 

Q.  How  can  you  account  for  the  spread  of  these  organizations?  A 
Because  it  is  something  like  a  lottery.  If  you.  can  account  for  the  success 
of  the  lottery,  it  will  account  for  the  temporary  success  of  these  organiza- 
tions, because  they  do  distribute  prizes  in  the  form  of  advance  loans  on 
the  coupons  first  maturing.     That  of  course  advertises  them  favorably. 

Q.  Do  you  favor  a  law  to  suppress  these  bogus  endowment  associations 
or  to  regulate  them  ?  A.  I  would  favor  a  law  to  bring  them  under  the 
insurance  department,  so  that  they  should  publish  annually,  or  oftener,  a 
full  statement  of  their  receipts  and  disbursements.  I  would  like  to  add  to 
the  statement  I  made  a  moment  ago  that  nearly  every  northern  State  with 
an  insurance  department  has  a  law  requiring  all  assessment  associations 

6-L 


82 

to  make  an  annual  report  of  their  receipts  and  disbursements.  California 
has  not  any  such  law.  Now,  these  endowment  associations  misuse  the 
term  insurance.  They  are  not  insurance  associations.  They  don't  insure 
the  lives  of  people.  There  are  only  one  or  two  that  undertake  to  pay  a 
coupon  to  the  family  of  deceased  persons,  but  they  don't  insure  them.  It 
really  would  be  well  to  suppress  that  form  of  insurance  entirely,  just  as 
Michigan  does.  This  circular  means  that  in  Michigan  there  is  no  pro- 
vision in  the  State  laws  for  assessment  endowment  insurance. 

Q.  How,  in  your  opinion,  should  they  be  regulated  by  law?  A.  They 
should  be  suppressed,  because  it  is  impossible  for  them  to  pay  insurance 
unless  they  are  organized  as  old  line  insurance  companies,  with  advance 
premiums  and  money  placed  at  compound  interest. 

Q.  Upon  what  do  they  profess  to  depend  in  order  to  fulfill  their  pledges 
to  their  members  ?    A.  On  lapses.     They  rob  Peter  to  pay  Paul. 

Q.  On  new  members?  A.  That  is  not  a  very  liberal  growth,  a  perpetual 
growth,  which  we  know  is  impossible.  There  must  be  a  limit  to  that 
growth  in  the  nature  of  things,  and  however  honest  a  man  is  he  inevitably 
fails.     Growth  is  not  essential  to  the  perpetuation  of  the  old  line  companies. 

Q.  Do  you  consider  these  proprietary  companies,  such  as  the  Occidental, 
that  you  refer  to,  to  be  cooperative  in  any  sense  ?    A.  Not  in  any  sense. 

Q.  Do  you  believe  they  are  sailing  under  false  colors  in  professing  to  be 
cooperative?    A.  Yes;  they  certainly  are. 

Q.  Do  you  believe  that  the  members  of  these  associations  have  an  equal 
voice  with  the  inside  managers  in  their  management?    A.  No. 

Q.  And  there  can  be  no  cooperation  unless  there  is  a  cooperation  of 
interest  and  in  the  management  also  ?     A.  Yes. 

Q.  Do  you  believe  that  the  laws  of  the  State  should  require  inspection 
of  their  books  and  accounts  at  stated  periods  by  some  State  ofiicer  ?  A. 
x  es. 

Mr.  Spelling:  Can  you  tell  any  difference,  Mr.  Bacon,  between  an 
assessment  and  a  premium,  except  in  the  name?    A.  Altogether  different. 

Q.  Well,  are  they  not  levied  and  collected  just  alike  ?  A.  Not  at  all. 
A  man  makes  a  contract  of  insurance  with  an  organized  insurance  com- 
pany; he  agrees  to  pay  a  premium  that  is  limited  and  its  amount  specified. 
He  must  pay  so  much. 

Q.  Can  you  tell  any  actual  difference  in  the  privileges  and  manner  of 
doing  business  between  the  regular  life  insurance  companies  and  those 
that  pay  death  benefits?  Does  one  enjoy  any  privileges  that  are  not 
enjoyed  by  the  other?     A.  As  regards  the  law? 

Q.  Yes?  A.  The  old  line  companies  are  subject  to  the  law  and  must 
make  annual  reports,  and  their  books  are  open. 

Q.  Do  the  regular  insurance  companies  enjoy  any  privileges  that  are 
not  equally  enjoyed  by  any  endowment  associations  in  this  State  that 
levy  assessments  ?    A.  No. 

Q.  Should  not  the  same  rights  and  duties.  State  supervision,  and  the 
requirement  to  provide  a  guarantee  fund,  apply  to  one  as  to  the  other?  A. 
Just  as  well.  That  would  work  no  hardship  at  all  to  the  endowment  associ- 
ations or  to  the  life  insurance  associations.  I  imagine  that  no  honest  asso- 
ciation would  object,  because  the  cost  of  it  is  nominal. 

Q.  Was  not  an  effort  made  at  the  last  meeting  of  the  Legislature  to  have 
a  bill  passed  to  regulate  endowment  associations ?  A.  That  failed,  I  am 
told,  on  good  authority,  on  account  of  the  opposition  of  the  endowment 
associations. 

Q.  If  you  take  a  policy  of  one  of  these  endowment  associations  that 
promises  to  pay,  say,  $1,000  on  a  coupon  whose  maturity  is  pending  when 


83 

death  occurs  in  consideration  of  assessments  to  be  levied  by  the  Directors, 
is  not  that  in  effect  a  life  insurance  policy  ?  A.  That  is  in  effect  a  policy, 
not  a  life  insurance  policy. 

Q.  Is  it  not  substantially  the  same  as  policies  issued  by  regular  com- 
panies who  comply  with  the  law  ?    A.  That  I  cannot  say. 

Q.  With  reference  to  the  force  that  the  Legislature  must  bring  to  the 
present  inquiry,  do  you  remember  some  of  the  salient  features  of  the  bill  ? 
A.  The  salient  features  of  that  bill  simply  required  annual  reports  of 
receipts  and  disbursements,  and  directed  the  Insurance  Commissioner  to 
examine  their  books  at  any  time. 

Q.  Mr.  Bishop,  of  the  Oakland  company,  has  testified  that  he  had  a  bill 
there,  or  his  company  was  interested  in  a  bill  that  was  introduced  into  the 
last  Legislature.  Do  you  remember  anything  of  it  or  know  anything  about 
it?  A.  I  don't  remember  the  words  of  the  bill.  I  know  that  they  had 
such  a  bill. 

Q.  That  was  a  bill  in  the  interests  of  the  endowment  associations?  A. 
Yes. 

Q.  Do  you  know  anything  of  the  bill?     A.  Well,  I  don't  recollect  now. 

Q.  But  you  say  that  legislation  was  defeated  there  in  consequence  of  the 
interposition  of  members  of  the  endowment  associations  ?  A.  By  the  rep- 
resentatives of  the  endowment  companies  controlled  by  officers  who  came 
from  San  Francisco  at  the  call  of  the  companies — so  I  have  been  told  on 
good  authority. 

Q.  Have  you  found,  Mr.  Bacon,  in  your  experience  with  these  institutions, 
that  it  is  the  ordinary  plan  of  them  to  change  the  first  plan  of  assessment 
where  the  maturity  of  the  coupon  is  for  a  shorter  period  into  one  where  the 
maturity  is  longer?  A.  I  have  known  of  such  change  in  many  companies. 
The  new  companies  have  extended  their  period.  They  find  the  plans  did 
not  work  at  first. 

Q.  Under  what  section  of  the  law  do  they  claim  authority,  these  endow- 
ment associations?  A.  I  think  it  is  Section  45L  They  claim  that  they 
do  not  do  business  for  profit;  they  do  business  for  salary  and  commissions. 
I  don't  think  that  under  that  law  any  association  has  any  right  to  transact 
business  except  the  purely  fraternal;  I  know  that  was  the  design  of  the 
law. 


84 


COMPLAINTS  FROM  ENDOWMENT  VICTIMS. 


STATEMENT  OF  MARY  C.  CURRAN,  HOLDER  OF  CERTIFICATE  No.  702   IN 
THE  OCCIDENTAL  SELF-ENDOWMENT  ASSOCIATION. 

State  of  California,         | 

County  of  Solano,  j  ^^' 

Mary  Curran  first  being  duly  sworn  says:  I  am  the  mother  of  Mary  C. 
Curran,  the  holder  of  Certificate  No.  702  in  the  Occidental  Self-Endowment 
Association;  and  during  all  the  time  the  said  Mary  C.  Curran  was  the 
holder  thereof,  was  in  daily  communication  with  her. 

The  said  Mary  C.  Curran  is  now  twenty-four  years  of  age,  and  is  and 
has  been  employed  since  she  was  fourteen  years  of  age,  continuously,  as  a 
domestic;  and  thereby  earned  the  money  she  has  paid  into  the  said  Occi- 
dental Self-Endowment  Association. 

That  the  said  Mary  C.^ Curran  has  promptly  paid  all  assessments  and 
strictly  conformed  to  the  by-laws,  rules,  and  regulations  of  the  said  asso- 
ciation, up  to  the  time  of  its  failure,  to  wit,  March  17,  1889. 

That  the  said  Mary  C.  Curran  has  paid  into  the  said  association  as  dues 

and  assessments  the  amount  of dollars.    That  no  part  thereof  has 

been  returned  to  her.  That  all  the  said  sums  so  paid  to  said  association 
herein  mentioned  were  earned  by  her  hard  labor. 

That  the  said  Mary  C.  Curran  was  fully  assured  that  the  company  was 
sound  financially,  and  the  representations  made  to  her  by  the  said  com- 
pany's representative,  through  and  by  which  she  was  induced  to  pay  the 
money  aforesaid  to  said  association,  and  become  insured  therein,  have  not 
been  carried  out  on  the  part  of  the  company,  and  have  proven  to  be  false 
misrepresentations,  and  thereby  said  assured  was  wrongfully  deprived  of 
her  money. 

her 

MARY  X  CURRAN. 

mark. 

Subscribed  and  sworn  to  before  me  this  twentieth  day  of  September,  A.  D, 
1889. 

CHARLES  H.  HOBBS. 

Notary  Public. 

I,  Mary  C.  Curran,  the  assured,  have  carefully  read  the  foregoing  affi- 
davit, and  it  is  true. 

MARY  C.  CURRAN. 


STATEMENT    OF    MRS.    ELIZABETH   WILSON,   OP    SANTA     ROSA,    SONOMA    COUNTY, 

CALIFORNIA. 

I  was  induced  to  become  a  certificate  holder  with  the  Pacific  Mutual 
Endowment  and  Protective  Association  of  Santa  Rosa  four  years  ago  last 
July.  I  kept  my  assessments  paid  up  until  the  Occidental,  with  which  it 
consolidated,  quit  business. 


85 

I  am  a  poor  woman  with  a  family,  and  have  sat  up  in  bed  and  sewed 
when  I  was  not  well  enough  to  be  out  of  bed,  to  earn  the  money  to  meet 
the  assessments. 

After  my  assessments  were  doubled,  I  went  to  Judge  Overton  to  ask  the 
reason  why  they  were  increased,  and  he  very  gruffly  replied  that  he  knew 
nothing  about  it,  that  he  paid  his  assessments  when  due,  and  then  referred 
me  to  Mr.  Br  oak  for  further  information. 

I  then  went  to  Mr.  Broak.  He  explained  by  saying  that  in  order  to 
meet  the  maturing  coupons,  they  found  it  necessary  to  increase  the  assess- 
ments. I  told  him  how  very  hard  it  was  for  me  to  make  the  payments, 
and  asked  what  shall  I  do.  His  reply  was,  keep  them  paid  up  by  all 
means.  '  I  considered  the  Occidental  Self-Endowment  Association  as  safe 
as  any  bank  in  the  country.  I  also  went  to  the  Directors,  and  they  said 
the  same  in  substance. 

I  am  now  an  invalid  and  a  great  sufferer,  and  shall  never  again  be  able 
to  bear  the  duties  that  devolve  upon  me,  and  I  make  this  appeal  through 
the  Courts  of  justice,  that  my  wrongs  may  be  made  right  inasmuch  as  I 
shall  receive  back  the  hard  earned  money  I  have  paid  into  that  association. 

MRS.  ELIZABETH  WILSON. 

Subscribed  and  sworn  to  before  me  this  twentieth  day  of  September,  1889. 

JOHN  BROWN, 
Justice  of  the  Peace,  Santa  Rosa  township,  county  and  State  aforesaid. 


STATEMENT   OF   MRS.   ANNIE    SECCHITANO,    OF   SAN   JOSE. 

I  am  a  widow  with  a  large  family  of  children;  have  a  small  grocery  and 
fruit  store,  and  depend  entirely  on  the  profits  of  the  business  for  my 
support. 

In  May,  1885, 1  was  induced  to  join  the  Occidental  Self-Endowment 
Association,  then  called  the  Mutual  Self-Endowment  and  Benevolent  Asso- 
ciation of  America,  the  Pacific  Coast  department,  and  took  a  policy  in  the 
same.  The  promise  was  held  out  to  me  that  I  should  receive  loans  from 
time  to  time,  and  at  the  end  of  four  years  the  sum  of  $2,000,  less  the 
amount  loaned  to  me. 

My  assessments  were  very  heavy — $20  a  month  for  a  greater  portion  of 
the  time — and  it  was  impossible,  with  all  my  self-denial,  to  meet  them 
from  my  own  income.  I  was  obliged  to  borrow  from  various  parties,  and 
did  borrow  on  the  assurance  that  I  should  receive  the  money  from  the 
association  as  promised.    By  this  means  I  met  and  paid  all  the  assessments. 

On  the  failure  of  the  association  in  March,  1889,  I  was  left  with  debts 
incurred  for  this  money  borrowed,  and  am  still  in  debt  and  using  money 
I  need  to  meet  bills  for  purchases  to  continue  my  business,  to  pay  the  old 
debts  made  to  pay  assessments. 

It  has  been  a  great  hardship  and  injury  to  me. 

.  ANNIE  SECCHITANO. 
Witness  to  signature:  J.  H.  Leonard. 

San  Jose,  September  20, 1889. 


STATEMENT   OF   MRS.    JOSEPH   JUGHAM,   OF    SAN   J0S6. 

I  am  a  widow  conducting  a  small  lodging  house  and  doing  sewing  for 
my  support. 

When  I  joined  the  Mutual  Self-Endowment  and  Benevolent  Association  of 
America,  Pacific  Coast  department,  since  known  as  the  Occidental  Self-En- 
dowment Association,  my  husband  was  living,  and  an  invalid  unable  to  work, 
and  I  joined,  hoping  to  receive  the  $1,000  promised  me  in  four  years,  which 
would  have  been  October  31,  1889.  I  was  also  promised  and  expected  to 
receive  loans  from  time  to  time,  but  never  received  anything.  I  met  and 
paid  all  assessments  until  the  association  failed  March  last,  and  deprived 
myself  of  many  comforts  to  do  so.  I  became  doubtful  of  the  stability  of 
the  company  before  it  failed,  and  consulted  the  Club  Manager,  R.  E.  Col- 
lins, who  told  me  that  he  had  examined  the  books,  and  everything  was 
straight  and  prosperous,  and  on  this  assurance  I  continued  to  pay  $10 
monthly.     I  need  the  money  which  I  have  paid. 

MRS.  JOSEPH  JUGHAM. 
Witness  to  signature:  J.  H.  Leonard. 

San  Jos6,  Cal.,  September  20,  1889. 


STATEMENT   OF   LOUIS   GRIEPENSTRUK,  OF  SAN  J0S:6. 

I,  the  undersigned,  hereby  declare  that  the  following  statement  is  true, 
to  wit:  That  I  am  a  resident  of  the  City  of  San  Jose,  County  of  Santa 
Clara,  State  of  California;  that  I  am  fifty-three  years  old;  that  I  have  a 
wife  and  nine  children;  that  I  am  a  poor  man  working  for  a  small  salary 
to  support  my  family;  that  I  was  induced  by  the  agent  of  a  life  insurance 
company,  known  as  the.  Occidental  Self-Endowment  Association,  to  take  a 
policy  for  $1,000  in  said  company;  that  said  agent  led  me  to  believe  that 
after  twelve  months  I  would  receive  loans  from  said  company  which  would 
be  more  than  sufficient  to  pay  all  future  assessments,  until  by  the  terms 
and  conditions  of  said  policy  the  first  coupon  would  mature  and  be  paid ; 
that  in  order  to  meet  these  assessments,  which  in  the  commencement  were 
payable  once  in  twenty  days,  but  later,  by  a  new  resolution  or  regulation 
of  the  managers,  once  in  fifteen  days,  I  was  compelled  to  deprive  myself 
and  family  of  much  that  was  necessary  to  our  comfort;  that  said  company 
did  not  meet  its  obligations,  and  that  I  have  thereby  suffered  a  pecuniary 
loss  which  works  a  great  hardship  to  myself  and  family. 

LOUIS  GRIEPENSTRUK. 

Witness  to  signature:  George  Koerber. 


